The Growth of the Public Sector and Inflation Pressure

  • A. Nussbaumer
Part of the International Economic Association Series book series (IEA)


It may be convenient in a theory of inflation to disregard the influence of the public sector or ‘to assume it away altogether because we have no theory of government expenditure’, as Domar has suggested originally in the context of the theory of economic growth [1] and because our theories of government income hardly go beyond the consequences of techniques used in taxation. But this probably is a more severe restriction for a theory of inflation than for the explanation of almost any other economic phenomenon. Regarding antiinflation policy this would also imply disregarding some of the most important policy instruments. On the contrary, I believe therefore that Schumpeter was right when insisting that fiscal policy and practice were of supreme importance for the development not just of national economies but also of human civilisation and of human behaviour, and that there were only very few exceptions to this rule [2]. Because the public sectors of most industrial economies have grown faster than their G.N.P. during the last decades, this may be even more true today than when Schumpeter wrote his article.


Public Sector Central Bank Fiscal Policy Public Expenditure Government Expenditure 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. [1]
    E. Domar, Essays in the Theory of Economic Growth (New York, 1957) p. 20.Google Scholar
  2. [2]
    J. A. Schumpeter, ‘Die Krise des Steuerstaates’. Zeitfrage aus dem Gebiet der Soziologie, 4. Heft, 1918, quoted from: Aufsätze zur Soziologie (Tübingen, 1953) p. 4.Google Scholar
  3. [3]
    T. Haavelmo, ‘Multiplier Effects of a Balanced Budget’, Econometrica. Oct. 1945, quoted from: Readings in Fiscal Policy (London, 1955) pp. 335.Google Scholar
  4. [4]
    J. Hanschel, Kreislauftheorie und Staatschaushalt, Zürich, St. Gallen, 1967, p. 18.Google Scholar
  5. [5]
    W. A. Salant, ‘Taxes, Income Determination and the Balanced Budget Theorem’. Review of Economics and Statistics, Vol. 39, p. 152 (1957).CrossRefGoogle Scholar
  6. [6]
    R. A. Musgrave, The Theory of Public Finance (New York, 1959), p. 17.Google Scholar
  7. [7]
    L. Johansen, Public Economics (Amsterdam, London, 1971), p. 3.Google Scholar
  8. [8]
    A. T. Peacock and J. Wiseman, The Growth of Public Expenditure in the United Kingdom(London, 1967), pp. 37 and 42.Google Scholar
  9. [9]
    E. Kertzman, ‘The Development of Dutch Public Finance during the Period 1957 – 1969’. Finanzarchiv, N.F., Vol. 31, p. 127 (1972).Google Scholar
  10. [10]
    R. S. Thorn, ‘The Evolution of Public Finances during Economic Development’, Public Expenditure Analysis, B. S. Sahni (ed.), (Rotterdam, 1972), p. 187.Google Scholar
  11. [11]
    Beirat für Wirtschafts- und Sozialfragen, Budgetvorschau für das Bundesbudget der Republik Österreich 1974 – 1978 (Wien, 1974), p. 39.Google Scholar
  12. [12]
    H. C. Adams, The Science of Finance (New York, 1898), chapter 2.Google Scholar
  13. [13]
    A. Wagner, Finanz Wissenschaft (Leipzig, 1890), 3rd ed., part I, p. 16.Google Scholar
  14. [14]
    D. Greytak, R. Gustely and R. J. Dinkelmeyer, ‘The Effects of Inflation on Local Government Expenditures’. National Tax Journal, Vol. 27, p. 592 (1974).Google Scholar
  15. [15]
    J. E. Haring and J. F. Humphrey (eds), Utility Regulation during Inflation (Los Angeles, 1971), p. 13.Google Scholar
  16. [16]
    F.L. Fernbach, The Increasing Role of Intergovernmental Transfer Payments in the Performance of State and Local Functions. Federal Expenditure Policy for Economic Growth and Stability, Joint Economic Committee, US Government Printing Office (Washington, 1957), pp. 180.Google Scholar
  17. [17]
    W. L. Smith, Fiscal Policy Issues of the Coming Decade. Materials Submitted to the Subcommittee on Fiscal Policy of the Joint Economic Committee, US Government Printing Office (Washington, 1965), p. 134.Google Scholar
  18. [18]
    Beirat für Wirtschafts- und Sozialfragen, Empfehlungen zur Budgetpolitik. Vorschläge zur Neuklassifizierung der Transaktionen der öffentlichen Hand (Wien, 1965).Google Scholar
  19. [19]
    E. S. Phelps (ed), Microeconomic Foundations of Employment and Inflation Theory (New York, 1969).Google Scholar
  20. [20]
    D. Laidler, ‘Information, Money and the Macroeconomics of Inflation’, Swedish Journal of Economics, Vol. 76 (1974).Google Scholar
  21. [21]
    P. Davidson and S. Weintraub, ‘Money as Cause and Effect’, Economic Journal,Google Scholar
  22. [22]
    G. Edgren, K. O. Faxen and C. E. Odhner, ‘Wages, Growth and the Distribution ot Income’. Swedish Journal of Economics, Vol. 71 (1969).Google Scholar
  23. [23]
    O. Aukrust and I. Prim, A Model of the Price and Income Distribution Mechanism of an Open Economy (Oslo, 1970).Google Scholar
  24. [24]
    F. Schebeck and H. Suppanz, Ökonometrische Inflationsanalyse für Österreich 1060/1975. Empirica, Vol. 2, p. 180, p. 197 (1974).Google Scholar
  25. [25]
    J. Werner, ‘Verteilungspolitik — wachstumspolitische und stabilitätspolitische Aspekte’. Beiträge zur Wirtschafts— und Gesellschaftspolitik. Festschrift für Theodor Pütz (Berlin, 1975), pp. 221.Google Scholar
  26. [26]
    H. Schleicher, Staatshaushalt und Strategie (Berlin, 1971), pp. 22 and 238.Google Scholar
  27. [27]
    J. S. Duesenberry, Government Expenditures and Growth. Federal Expenditure Policy for Economic Growth and Stability. Joint Economic Committee (Washington, 1957), pp. 289 and 291.Google Scholar
  28. [28]
    E. D. Domar, Contribution of Federal Expenditures to Economic Growth and Stability. Federal Expenditure Policy. Joint Economic Committee (Washington, 1957), p. 269.Google Scholar
  29. [29]
    G. Bombach, ‘Möglichkeiten und Grenzen einer Verteilungspolitik. Lohnpolitik und Einkommensverteilung’. Schriften des Vereins für Socialpolitik, N.F., Vol. 51, p. 834 (1969).Google Scholar
  30. [30]
    W. Fellner, Trends and Cycles in Economic Activity (New York, 1956), pp. 212– 215 and 357 – 367.Google Scholar
  31. [31]
    E. Matzner, Consequences and Preconditions of Retarded Economic Growth. Institut für Finanzwissenschaft und Infrastrukturpolitik der Technischen Hochschule in Wien, No. 7, pp. 8 – 12 (1975).Google Scholar

Copyright information

© International Economic Association 1977

Authors and Affiliations

  • A. Nussbaumer
    • 1
  1. 1.Institute of EconomicsUniversity of ViennaAustria

Personalised recommendations