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GrowingPublic
SocialSpendingandEconomicGrowth
SincetheEighteenthCentury
GrowingPublicexaminesthequestionofwhethersocialpoliciesthat
redistributeincomeimposeconstraintsoneconomicgrowth.Taxesand
transfers have been debated for centuries, but only now can we get a
clearviewofthewholeevolutionofsocialspending.Whatkeptpros-
peringnationsfromusingtaxesforsocialprogramsuntiltheendofthe
nineteenth century? Why did taxes and spending then grow so much,
and what are the prospects for social spending in this century? Why
didNorthAmericabecomealeaderinpubliceducationinsomeways
andnotothers?Lindertfindsanswersintheeconomichistoryandlogic
of political voice, population aging, and income growth. Contrary to
traditionalbeliefs,thenetnationalcostsofgovernmentsocialprograms
arevirtuallyzero.ThisbooknotonlyshowsthatnoDarwinianmech-
anismhaspunishedthewelfarestates,butuseshistorytoexplainwhy
this surprising result makes sense. Contrary to the intuition of many
economists and the ideology of many politicians, social spending has
contributedto,ratherthaninhibited,economicgrowth.
Peter H. Lindert is a Distinguished Professor of Economics at the
University of California, Davis, and a Research Associate of the
National Bureau of Economic Research. His writings have touched
onawiderangeofeconomicandhistoricaltopicsrelatingtoEurope,
theUnitedStates,China,Indonesia,andtheglobaleconomy.Histext-
booksininternationaleconomicshavebeentranslatedintoeightother
languages.
Growing Public
Social Spending and Economic Growth
Since the Eighteenth Century
Volume 2
Further Evidence
PETER H. LINDERT
UniversityofCalifornia,Davis
cambridge university press
Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo
Cambridge University Press
The Edinburgh Building, Cambridge cb2 2ru, UK
Published in the United States of America by Cambridge University Press, New York
www.cambridge.org
Information on this title: www.cambridge.org/9780521821759
© Peter H. Lindert 2004
This publication is in copyright. Subject to statutory exception and to the provision of
relevant collective licensing agreements, no reproduction of any part may take place
without the written permission of Cambridge University Press.
First published in print format 2004
isbn-13 978-0-511-19486-3 eBook (EBL)
isbn-10 0-511-19486-2
eBook (EBL)
isbn-13 978-0-521-82175-9 hardback
isbn-10 0-521-82175-4 hardback
Cambridge University Press has no responsibility for the persistence or accuracy of urls
for external or third-party internet websites referred to in this publication, and does not
guarantee that any content on such websites is, or will remain, accurate or appropriate.
Contents
PrefacetoVolume2 page ix
part five: the underlying framework
13. AMinimalTheoryofSocialTransfers 3
FromtheBottomUp 3
TheBasicModelofRedistributiveFights 5
WhoCaresaboutWhom? 11
TheTreatmentofOutsiders 13
ChangingVoice 16
ExtendingSuffrage 16
DecentralizationversusCentralization 18
SummaryofPredictions 18
14. AGuidetotheTests 20
WhatKindofLaboratory? 20
TheSimultaneousSystemLinkingSocialSpendingandGrowth 22
SomeAlternativeViews 26
HowCouldOneCountryBecomeAnotherCountry?The
Stay-in-SampleRule 28
part six: accounting for social spending,
jobs, and growth
15. ExplainingtheRiseofMassPublicSchooling 33
QuantifyingtheDeterminantsofMassSchooling 34
EnrollmentsandTeachersin1880–1937 34
Expendituresin1962–1981 39
TheExogeneityofDemocracy 41
v
vi Contents
ElitistFingerprintsinThirdWorldEducationPolicy 43
ThreeFingerprints 43
FindingtheFingerprintsinAsiaforthe1980s 46
Summary 50
16. ExplainingtheRiseofSocialTransfers,1880–1930 51
SomeForcesThatLedtheWay 51
AddingUptheExplanations 58
Summary 61
17. WhatDrovePostwarSocialSpending? 63
ThreeMainForces 64
Elections 64
PopulationAgingAgain 65
IncomeGrowth 70
OtherVerdicts 70
MomentumfromPastTransfers 70
ReligionandEthnicFractionalization 71
Openness 71
MilitarySpending 72
FixedCountryEffects 72
AccountingforDifferencesinSocialSpending 73
Summary:HowHavetheDeterminantsChanged
Since1880? 80
18. SocialTransfersHardlyAffectedGrowth 82
BasicRequirementsforFindingtheGrowthEffects
ofSocialTransfers 83
WhatPastGrowthTestsHaveFound 84
BetterTests 85
WhatNetCostsRemain? 98
19. ReconcilingUnemploymentandGrowthintheOECD 100
UnemploymentSince1960 101
ExplainingEmploymentandUnemployment 104
TheRoleofBenefitsfortheUnemployed 106
EmployeeProtectionLaws 110
ActiveLaborMarketPolicies 114
ReinterpretingtheRoleofCorporatism 116
HowtheSameForcesAffectedProductivity 116
Summary:Institutions,Jobs,andGrowth 120
Contents vii
appendices
A. TimeSeriesonSchoolEnrollmentsandTeachers,1830–1930 122
B. ConflictingDataonElementarySchoolEnrollmentswithinthe
UnitedKingdom,1851–1931 147
C. PublicandTotalEducationalExpendituresasPercentagesof
NationalProduct,since1850 153
D. RegressionsPredictingSchooling,Growth,SocialTransfers,
andDirectTaxes,1880–1930 160
E. RegressionsPredictingSocialSpending,Growth,and
Employment,OECD1962–1995 172
F. SocialTransferscirca1990versusHistory 194
G. PostregressionAccountingFormulae 198
Notes 201
Bibliography 210
Index 220
