The Determinant Studies of Public Expenditures of State and Local Governments-A Critical Survey

Abstract

Since Solomon Fabricant attempted, by using regression analysis, to explain statistically the variation in per capita state and local government expenditures in 1942, there have been a lot of quantitative studies of state and local government expenditures by both economists and political scientists. Some studies attempted to refine the theoretical models; some studies tried to improve the explanatory power of the models adding new independent variables; and some others were involved III the methodological improvement. Despite the methodological limitations, the positive theory of state and local governments which is, to use Musgravian terminology, a sociology of fiscal politics seems to have contributed empirical knowledge to the theory of public finance which is heavily oriented to the normative approach. The social, economic and political determinant studies of state and local government's expenditure are concerned with the level of public budget of respective governments which is also one of the two major functional areas of the subordinate governments dealt with by the normative theory. Unfortunately, however, there does not seem to exist any theoretical interrelationship between the two approaches. If a theory of public finance is to be realistic and policy-oriented, there should be a feedback between the two approaches. The empirical theory is useless or just an academic novelty if it does not have any meaningful normative implications. On the other hand, the normative theory can not ignore the positive aspect entirely if it attempts to deal with policy problems. The purpose of this paper is to review the past quantitative studies of state and local government expenditures from critical point of view, to make some critical comment on the methodological and conceptual problems, and to suggest some future research directions