Stages of Budgetary Development

32 Pages Posted: 23 Mar 2007

See all articles by Yilin Hou

Yilin Hou

Maxwell School, Syracuse University

Date Written: June 2006


This article examines the development of public budgeting since the Industrial Revolution to offer an explanatory framework on budgeting as a governance instrument. The article proposes that budgeting has evolved as innovations in financial administration to respond to socio-economic challenges as society entered the industrial, the welfare and the economy states. Government first expanded to provide public services that were vital during early industrialization; it then increased expenditure on social programs to dissolve potential social unrests; it finally intensified intervention in the economy to mitigate drastic fluctuations of national economies. Corresponding to the three socio-economic eras, budgeting has gone through three stages: the budget, the finance, and the economy. In the course, budgeting shifted from a micro to macro focus, moving toward longer spans, wider perspectives, and loss of annual budget balance. The article includes three mini-cases to test the framework. It concludes with directions for further research.

Keywords: budget, economy, society, welfare state, industrialization

JEL Classification: H11, H60, H61

Suggested Citation

Hou, Yilin, Stages of Budgetary Development (June 2006). Available at SSRN: or

Yilin Hou (Contact Author)

Maxwell School, Syracuse University ( email )

426 Eggers Hall
Syracuse, NY 13244-1020
United States
315-443-3114 (Phone)

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