New Evidence on the Historical Growth of Government in Europe: The Role of Labor Costs

Andrew Christopher Pickering; Mickael Melki

doi:10.1016/j.ejpoleco.2019.05.006

New Evidence on the Historical Growth of Government in Europe: The Role of Labor Costs

Andrew Christopher Pickering, Mickael Melki

Economics

Research output: Contribution to journal › Article › peer-review

Abstract

We document a robust positive correlation between the size of government and the labor share of income in data from European countries covering the period 1869-1975. Following Facchini et al (2017), we interpret this correlation as evidence that labor costs drive public spending. The long-term increase in the labor share observed over this period explains half of the overall growth of central government. The relationship holds when the labor share is instrumented with movements in technological change at the frontier. When decomposing public spending, transfers, not intensive in labor, are the only component not associated with the labor share.

Original language	English
Pages (from-to)	445-460
Number of pages	16
Journal	European Journal of Political Economy
Volume	59
Early online date	7 Jun 2019
DOIs	https://doi.org/10.1016/j.ejpoleco.2019.05.006
Publication status	Published - Sep 2019

Bibliographical note

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10.1016/j.ejpoleco.2019.05.006

labor cost and government size historical
© 2019 Elsevier B.V. This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy.
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Cite this

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