Peacock and Wiseman's Displacement Effect: A Reappraisal and a New Test

20 Pages Posted: 14 Nov 2012

See all articles by Magnus Henrekson

Magnus Henrekson

Research Institute of Industrial Economics (IFN)

Date Written: January 12, 1990

Abstract

Although Peacock and Wiseman's "displacement effect" is frequently cited as an explanation of increases in government spending over time, the theory has so far been inadequately tested. In this paper four versions of the hypothesis are identified, and earlier empirical tests are reviewed and found efficient. A new test focusing in the time-series behavior of government spending is developed and tested on data for Sweden and the U.K. The test examines upward displacement after World War II, the only social upheaval which, du to data limitations, allows for a test of displacement. Strong evidence against the hypothesis is found.

Keywords: Government growth, Government expenditure, Displacement effect

Suggested Citation

Henrekson, Magnus, Peacock and Wiseman's Displacement Effect: A Reappraisal and a New Test (January 12, 1990). European Journal of Political Economy, Vol. 6, No. 3, 1990, Available at SSRN: https://ssrn.com/abstract=2174657

Magnus Henrekson (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 55665
Grevgatan 34
Stockholm, SE-10215
Sweden
+46-8-6654502 (Phone)
+46-8-6654599 (Fax)

HOME PAGE: http://www.ifn.se/mh

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
902
Abstract Views
6,495
rank
28,576
PlumX Metrics