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Are There Ratchets in the Growth of Federal Government Spending?

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  • Randall G. Holcombe

    (Florida State University)

Abstract

The ratchet theory of government growth hypothesizes that temporary crises cause government spending to rise and to remain permanently higher than if the crises had not occurred. An examination of federal government spending in the United States since 1800 reveals apparent ratchets associated with the Great Depression, the two world wars, and the Civil War. After taking account of war-related spending and serial correlation in the data, however, only the World War I and Great Depression ratchets can be clearly identified, and they are closely associated with a major change in the underlying growth rate of government spending early in the 20th century. This casts doubt on the ratchet theory of government growth and instead raises the question of why the trend growth rate of government was so much greater in the 20th century than in the 19th.

Suggested Citation

  • Randall G. Holcombe, 1993. "Are There Ratchets in the Growth of Federal Government Spending?," Public Finance Review, , vol. 21(1), pages 33-47, January.
    • Handle: RePEc:sae:pubfin:v:21:y:1993:i:1:p:33-47
    DOI: 10.1177/109114219302100102
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    References listed on IDEAS

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    Cited by:

    1. Bjørnskov, Christian & Rode, Martin, 2016. "And Yet It Grows: Crisis, Ideology, and Interventionist Policy Ratchets," Working Paper Series 1135, Research Institute of Industrial Economics.
    2. Stanley Winer & Michael Tofias & Bernard Grofman & John Aldrich, 2008. "Trending economic factors and the structure of Congress in the growth of government, 1930–2002," Public Choice, Springer, vol. 135(3), pages 415-448, June.
    3. Andrew T. Young & Jamie Bologna, 2016. "Crises And Government: Some Empirical Evidence," Contemporary Economic Policy, Western Economic Association International, vol. 34(2), pages 234-249, April.
    4. Randall Holcombe, 2005. "Government growth in the twenty-first century," Public Choice, Springer, vol. 124(1), pages 95-114, July.
    5. Facchini, Francois, 2014. "The determinants of public spending: a survey in a methodological perspective," MPRA Paper 53006, University Library of Munich, Germany.
    6. Russell Sobel & George Crowley, 2014. "Do intergovernmental grants create ratchets in state and local taxes?," Public Choice, Springer, vol. 158(1), pages 167-187, January.
    7. Mehrdad Vahabi & Philippe Batifoulier & Nicolas Silva, 2020. "A theory of predatory welfare state and citizen welfare: the French case," Public Choice, Springer, vol. 182(3), pages 243-271, March.
    8. O'Reilly, Colin & Powell, Benjamin, 2015. "War and the growth of government," European Journal of Political Economy, Elsevier, vol. 40(PA), pages 31-41.
    9. Philippe Batifoulier & Nicolas da Silva & Mehrdad Vahabi, 2019. "A theory of predatory welfare state and citizen welfare: the French case," CEPN Working Papers hal-02073247, HAL.

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