Explaining the growth of government expenditure: Australian government department appropriations since world war two

Political economists have concentrated on explaining the growth of total government expenditure rather than individual governmental institutions. This paper applies four models of governmental behaviour from the public administration and public choice areas to the growth of the major Australian government departments in the period 1947–1979, and provides forecasts of expenditure for the years 1980–1982. The three models are: budgetary incrementalism, based on the auto‐correlation of departmental appropriations; the degree of bureaucratic monopoly power vis‐a‐vis its financial sponsor; a macro model incorporating social, political and economic incentives for governmental expenditure (e.g. unemployment); and a model based on measurements of the demand of the median voter for government services. The results suggest that a simple budgetary incrementalism model, using a first order autoregression provides the best explanation for institutional growth over the past thirty years and the best forecasts.