Michele Fratianni

The growth of government in Italy: Evidence from 1861 to 1979

ConclusionsThat the public sector has grown both in absolute terms and relative to the rest of the economy is an undisputable fact. That both growth rates have accelerated in recent history is also an unchallenged fact. More cautious must we be about why these trends have occurred and are persisting. We have tested three partially competing theories of government growth using Italian annual data from 1861 to 1979 and assessed that the redistribution model explains the facts better than either the public goods model or the specialized-interest hypothesis, although the latter tells the most convincing story about the causes underlying transfers to firms. We have also tried to discriminate between two competing views of a politician: the value-free intermediary found in the median voter literature and the entrepreneur emphasized in the theory of agency costs. The bits of evidence we gathered are more consistent with a politician-entrepreneur than a politician-intermediary.