Growing Public

Abstract

Growing Public examines the question of whether social policies that redistribute income impose constraints on economic growth. Taxes and transfers have been debated for centuries, but only now can we get a clear view of the whole evolution of social spending. What kept prospering nations from using taxes for social programs until the end of the nineteenth century? Why did taxes and spending then grow so much, and what are the prospects for social spending in this century? Why did North America become a leader in public education in some ways and not others? Lindert finds answers in the economic history and logic of political voice, population aging, and income growth. Contrary to traditional beliefs, the net national costs of government social programs are virtually zero. This book not only shows that no Darwinian mechanism has punished the welfare states, but uses history to explain why this surprising result makes sense. Contrary to the intuition of many economists and the ideology of many politicians, social spending has contributed to, rather than inhibited, economic growth.

The Role of Institutions in Growth and Development

“…This is not to argue that reform of de jure institutions is not possible or that it is irrelevant. For example, democratization in many European societies in the nineteenth century appears to have significantly changed economic institutions, for example leading to sustained expansions of educational systems (Acemoglu and Robinson, 2000;Lindert, 2004). Nevertheless, this section emphasizes that such reforms come with pitfalls.…”

The Democratic Transition

“…We ran two sets of regressions, one spanning the whole period, the other focusing on the period 1960 This variable is taken from the data on education by age borrowed from the same sources than those underlying Morrisson and Murtin (2009). 20 In results available upon request, we introduced a cubic in the level of democracy to detect potentially non-linear effects as suggested by Lindert (2004). We could not find any evidence of non-linearity.…”

“…The evidence in favor of such effects is mixed. For instance, Barro (1997) found a nonlinear effect of democracy on growth, with an initial increase in 1 See Lindert (2004), Murtin and Viarengo (2010), and Morrisson and Murtin (2009). 2 Democracy in America, Volume 1, chapter 9, "The main causes that tend to maintain a democratic republic in the United States".…”

“…Tavares and Wacziarg (2001) uncovered a positive effect of democracy on human capital accumulation and a negative effect on physical capital accumulation, while Rodrik and Wacziarg (2005) found a positive short-term effect of democratization on economic growth, but no effect at longer horizons and no effect when democracy was sustained for long periods. More specifically related to education, Lindert (2004) documented how the extension of the franchise in Europe's rising democracies gradually led to the introduction of public funding for education over the 19  and 20  centuries, but he did not provide empirical evidence on the direction of causality between schooling and democracy.…”

Is Africa Different? Historical Conflict and State Development

“…Lindert (2004) and Besley and Persson (2013) note a striking similarity between the historical evolution of fiscal systems and current differences in fiscal systems between rich and poor countries. As states developed stronger fiscal systems over time, there was a shift from indirect taxes such as trade taxes toward direct taxes such as income taxes.…”