Convergence in Government Spending: Theory and Cross-Country Evidence

33 Pages Posted: 28 Dec 2004

See all articles by Mark Skidmore

Mark Skidmore

Michigan State University - Department of Agricultural Economics

David Merriman

University of Illinois at Chicago - Institute of Government and Public Affairs; Department of Public Administration

Hideki Toya

Nagoya City University - Department of Economics

Abstract

Under reasonable assumptions about production technologies, international competition for factors of production will lead to convergence of per capita output. Is there an analogous process that leads to convergence of public sector activity? We provide a simple model that predicts convergence in government spending under certain assumptions. We show that Barro's (1990) model of endogenous growth with government spending provides one justification for the necessary assumptions and therefore supports the convergence hypothesis. We also discuss the possibility that increasing globalization has led to convergence in government spending. Our cross-country empirical investigation provides compelling evidence of convergence in per capita government consumption spending, per capita government capital spending, and per capita government education spending. These findings provide a new framework for explaining the underlying dynamic forces that determine growth of government.

Suggested Citation

Skidmore, Mark L. and Merriman, David and Toya, Hideki, Convergence in Government Spending: Theory and Cross-Country Evidence. Available at SSRN: https://ssrn.com/abstract=636867

Mark L. Skidmore (Contact Author)

Michigan State University - Department of Agricultural Economics ( email )

East Lansing, MI 48824
United States

David Merriman

University of Illinois at Chicago - Institute of Government and Public Affairs

Chicago, IL 60607
United States

Department of Public Administration ( email )

400 S Peoria St.
2122 AEH (MC278)
Chicago, IL 60607
United States

Hideki Toya

Nagoya City University - Department of Economics ( email )

Yamanohata 1, Mizuho-cho, Mizuho-ku
Nagoya, 467-8501
Japan

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