median voters or budget maximizers evidence from school expenditure referenda some readers may have found these results of greater interest were we able to confirm the directional hypotheses of the certainty setter model in addition to finding that spending is related to the reversion the much weaker prediction of the uncertainty model yet the failure of the certainty when base elections were optional their infrequent occurrence might be expected under either a median voter or a setter model for those districts that did hold base elections the observations appear consistent with a setter model but are either inexplicable by or inconsistent with a median voter model finally both a the relationship between the number of budget elections and the presence of base elections and b the outcome of mandatory base elections in 1978 provide a set of observations that are challenging to either model a similar challenge was posed by our investigation of budget elections when we called attention to the inadequacy of static full information models rather than resolving the question of the simple setter model against the simple median voter model our results indicate that both may be inappropriate and that endeavors dealing with complexities omitted here are warranted

legislative district configurations and fiscal policy in american states in accordance with the median voter theorem the median legislator is decisive in representative democracy if the preferences of the median legislator differ from the preferences of the median voter in the polity fiscal policy choices will predictably diverge from those favored by the median voter this paper seeks to identify the median district and therein the preferences driving the median legislator in american state legislatures using economic characteristics of constituents we find substantial differences between the median district and the statewide median as the income of the median district rises above the median income of the polity government expenditures increase in addition the degree to which income is skewed across legislative districts affects spending for redistribution programs finally we find that direct democracy procedures which allow the statewide median voter to check legislative decisions limit the impact of differences between the district and polity medians

financial intermediation reserve requirements and inside money a general equilibrium analysis abstract reserve requirements are examined in a general equilibrium context the paper develops a simple general equilibrium model that includes diverse opportunities for investment and a role for financial intermediaries two versions of the model are considered one is a thought experiment in which currency serves purely to satisfy legal reserve requirements the other is more realistic the model is used to analyze the comparative static effects of changes in reserve requirements the effects of changes in other parameters of the economy in the presence of reserve requirements and some qualitative issues raised by reserve requirements

has the median voter found a ballot box that he can control this paper examines the appropriateness of the median voter hypothesis within an agenda control framework where the alternative to a proposed expenditure level is the existing level evidence from new york state school districts suggests that within this institutional setting the actual level of public service provision does not differ significantly from the median voter s preferred level the evidence also suggests that demand function parameter estimates for educational expenditures are not sensitive to the assumption that the public service output level corresponds to the median voter s private equilibrium

governmental behavior in representative democracy a synthesis of the theoretical literature what is the impact of bureaucratic behaviors on tax rates what is preferable a bureaucrat or a partisan politician does a flypaper effect occur when lobby groups influence public policies this article tries to answer these questions by analyzing and comparing six different models of public choice 1 the median voter model 2 the leviathan model 3 the slack maximizing model 4 a general model of bureaucracy 5 the partisan politicians model and 6 a general model of lobbying among several results it is shown that the median voter s income and tax share almost always play a significant role in the design of the public good tax package even if the government does not explicitly try to maximize the median voter s utility the article also provides a synthesis of the positive analysis of the flypaper effect

biased tax price or grant expenditure elasticities abstract minor differences in logarithmic government expenditure function specifications lead to wide swings in elasticity estimates the median voter model is use to identify the biases as well as the appropriate adjustments to bring the elasticities into conformity across model specifications

candidate reputations and the incumbency effect abstract a major shortcoming of the classical median voter model is that its central prediction convergence of platforms to the median voter s ideal is seldom observed one reason is that the classical model neglects the importance of voter expectations as a determinant of votes here we associate voters expectations about candidates with past as well as current candidate pronouncements and assume that incumbents whose actions are consistent with their reputations are perceived as less risky than challengers in equilibrium candidates choose distinct platforms typically neither adopts the median voter s ideal point either candidate may win depending on how well the incumbent s reputation reflects current voter tastes and how relatively risky the electorate perceives the challenger to be

interbank market liquidity and central bank intervention we develop a simple model of the interbank market where banks trade a long term safe asset when there is a lack of opportunities for banks to hedge idiosyncratic and aggregate liquidity shocks the interbank market is characterized by excessive price volatility in such a situation a central bank can implement the constrained efficient allocation by using open market operations to fix the short term interest rate it can be constrained efficient for banks to hoard liquidity and stop trading with each other if there is sufficient uncertainty about aggregate liquidity demand compared to idiosyncratic liquidity demand

dynamic processes for public goods an institution oriented survey a nontechnical but nevertheless not informal account is given of dynamic models recently developed in the theory of public goods after a purely descriptive presentation of three basic models section 2 and their many subsequent extensions section 3 various reflections are made in section 4 on issues raised by an institutional perspective first the usual planning interpretation of such processes is presented and commented upon next contrasting normative and positive approaches to public goods it is argued that one category of processes can be given an interpretation much in line with the literature on positive public economics third the planning vs voluntary exchange institutions are contrasted from the point of view of cooperation among the agents in an economy with public goods

deposit insurance and money market freezes in the presence of deposit insurance a rise in counterparty risk may cause a freeze in interbank money markets we show this in a general equilibrium model with regionally segmented bank based retail financial markets in which money markets facilitate the reallocation of funds across banks from different regions counterparty risk creates an asymmetry between banks in savings rich regions which remain marginally financed by the abundant regional insured deposits and in savings poor regions which have to pay large spreads in money markets this asymmetry distorts the aggregate allocation of credit and in the presence of demand externalities can cause large output losses

government growth in the twenty first century public choice explanations of government growth fall into three main categories budget maximization theories rational choice models and path dependent models like the ratchet hypothesis the strengths and weaknesses of these theories as explanations for government growth are considered along with some facts about the actual growth of government to conjecture about its trajectory in the twenty first century government size seems to have been constrained in the past primarily by its ability to raise revenue growth rates in the new century thus appear to depend on factors constraining government s ability to continue to expand the tax base

a spatial theory of positive and negative campaigning abstract in order to explore the content of electoral campaigns this paper makes two modifications to hotelling s model of spatial competition first we assume that agents inherit initial locations and engage in costly relocation second an agent s relocation is affected by her rival s actions we investigate how a candidate allocates resources between positive campaigning which influences voters perceptions of her own ideology and negative campaigning which influences her opponent s perceived ideology our theory predicts that the candidate who is perceived as having less attractive personal attributes runs a relatively more negative campaign the theory s implications are illustrated for the 1988 presidential election journal of economic literature classification numbers c7 h0

valence politics and equilibrium in spatial election models spatial models of two party or two candidatecompetition almost never have pure strategy nashequilibria when the issue space has more than onedimension this paper shows that the introduction ofvalence issues can create conditions where equilibriaexist even in a multidimensional setting we derivesufficient conditions for the existence of equilibria and characterize the spatial locations of twocompeting parties or candidates when such equilibriaexist the party with the advantage on the valencedimension will generally take a moderate position onthe positional issues we consider the implications ofthese results for public perceptions of the parties incumbency advantages and realigning elections

is the median voter decisive evidence from referenda voting patterns abstract this paper examines whether the voter with the median income is decisive in local spending decisions previous tests have relied on cross sectional data while we make use of a pair of california referenda to estimate a first difference specification the referenda proposed to lower the required vote share for passing local educational bonding initiatives from 67 to 50 and 67 to 55 respectively we find that voters rationally consider future public service decisions when deciding how to vote on voting rules however the empirical evidence strongly suggests that an income percentile below the median is decisive for majority voting rules especially in communities that have a large share of high income voters with attributes that suggest low demand for public services based on a model that explicitly recognizes that each community contains voters with both high and low demand for public school spending we also find that an increase in the share of low demand voters is associated with a lower decisive voter income percentile for the high demand group this two type model implies that our low demand types individuals over age 45 with no children have demands that are 45 lower than other voters collectively these findings are consistent with high income voters with weak preferences for public educational services voting with the poor against increases in public spending on education

the overspending and flypaper effects of fiscal illusion theory and empirical evidence abstract this paper broadens the notion of fiscal illusion to include imperfect information where voters are unsure about how much they must pay for additional services or where they are unsure about the services received in return for higher taxes it shows how each type of voter imperfect information has different effects on public spending and modifies the overspending and flypaper effects predicted by the certainty model an empirical study of municipal expenditures provides support for the broader notion of fiscal illusion as imperfect information

the welfare cost of bank capital requirements abstract capital requirements are the cornerstone of modern bank regulation yet little is known about their welfare cost this paper measures this cost and finds that it is surprisingly large i present a simple framework which embeds the role of liquidity creating banks in an otherwise standard general equilibrium growth model a capital requirement limits the moral hazard on the part of banks that arises due to deposit insurance however this capital requirement is also costly because it reduces the ability of banks to create liquidity the key insight is that equilibrium asset returns reveal the strength of households preferences for liquidity and this allows for the derivation of a simple formula for the welfare cost of capital requirements that is a function of observable variables only using us data the welfare cost of current capital adequacy regulation is found to be equivalent to a permanent loss in consumption of between 0 1 and 1

political economy and the social marginal cost of public funds the case of the meltzer richard economy i introduction the marginal cost of public funds mcf is defined as the full cost to the private sector of raising an additional dollar of tax revenue including deadweight loss or excess burden of taxation imposed on taxpayers much of the theoretical literature on the mcf is cast in the framework of a one consumer economy however the main reason why we have distortionary taxes in the first place is precisely because of the need for redistribution or the existence of consumers with heterogeneity in view of this inconsistency several papers including dahlby 1998 and sandmo 1998 have recently started addressing the so called social marginal cost of public funds smcf in models with heterogenous consumers 1 these papers highlight how the redistributive concern may alter the calculation of the smcf 2 in previous studies on the mcf or smcf the existing of status quo tax system has been assumed to be either arbitrary or optimal 3 it is arguable however that the existing tax system is neither arbitrary nor optimal but rather represents a political equilibrium the approach adopted by hettich and winer 1999 and persson and tabellini 2000 corroborates this argument in surveying the political economy of public finance the authors of these two books explicitly portrayed public policy as the equilibrium outcome of some specified political process in this note we study the smcf issue on the basis of the plausible premise that the existing tax system itself represents a political equilibrium the calculation of the smcf is basically a normative exercise the premise that the existing tax system is a policy outcome in political equilibrium will enable us to exploit the positive property of political equilibrium in this normative exercise as an illustration of our approach we revisit the political economy of redistributive taxation as set out in meltzer and richard 1981 hereafter m r the m r model holds a prominent position in the redistribution literature and has been elaborated and extended in many directions persson and tabellini 2000 part ii 4 section ii overviews the m r model sections iii and iv derive and discuss the smcf in the m r economy an interesting feature of our finding is that the degree of income inequality as measured by the ratio of mean to median income can play an important role in estimating the smcf and judging whether the level of redistribution is excessive or inadequate ii the m r model a economy consideran economy in which there are n 1 u sup i u c sup i l sup i i 1 n this utility function is assumed to be smooth and possess the usual properties the income tax system consists of two parameters a marginal tax rate t and a lump sum grant a the tax system pays the lump sum grant or demogrant a to each individual and finances the payment by imposing the marginal tax rate t on all earned income 5 the budget constraint facing individual i is 2 c sup i 1 t w sup i l sup i a i 1 n where l sup i denotes the labor supply with l sup i l sup i 1 from equations 1 and 2 we can derive the indirect utility function 3 v sup i v 1 t w sup i a u 1 t w sup i l sup i a 1 l sup i i 1 n it is assumed that the government budget is balanced denoting per capita pretax income by y we then have 4 ty a where y summation y sup i n with y sup i w sup i l sup i b political economy the preferences of individuals qua voters over income tax policy are represented by the indirect utility function 3

locally provided public schooling in brazilian municipalities the objective of this paper is to assess the demand for public schooling in the brazilian municipalities within a median voter framework the quantile regression and spatial techniques proved to be useful to account for the spatial and marginal effects associated with educational services the coefficients attached to the main variables price income and population were significant and had the expected sign the relatively high values for those parameters attest the status for these merit goods as luxuries last but no least the municipal school system in brazil seems to present increasing returns to scale both at the school and the municipality level

does deposit insurance increase banking system stability an empirical investigation based on evidence of 61 countries in 1980 97 the authors find that explicit deposit insurance tends to be detrimental to bank stability the more so where bank interest rates are deregulated and the institutional environment is weak the adverse impact of deposit insurance on bank stability tends to be stronger the more extensive is the coverage offered to depositors and where the scheme is funded and run by the government rather than the private sector

covering dominance and institution free properties of social change this paper shows that different institutional structures for aggregation of preferences under majority rule may generate social choices that are quite similar so that the actual social choice may be rather insensitive to the choice of institutional rules specifically in a multidimensional setting where all voters have strictly quasi concave preferences it is shown that the uncovered set contains the outcomes that would arise from equilibrium behavior under three different institutional settings the three institutional settings are two candidate competition in a large electorate cooperative behavior in small committees and sophisticated voting behavior in a legislative environment where the agenda is determined endogenously because of its apparent institution free properties the uncovered set may provide a useful generalization of the core when a core does not exist a general existence theorem for the uncovered set is proven and for the downsian case bounds for the uncovered set are computed these bounds show that the uncovered set is centered around a generalized median set whose size is a measure of the degree of symmetry of the voter ideal points

evidence on voter preferences from unrestricted choice referendums from 1939 to 1968 florida used a unique referendum system to set property tax rates for public school operating expenditures at the median millage rate selected by voters these referendums revealed the entire distribution of voter preferences which is not possible in the standard up or down referendum we are the first to use the florida referendum data the form of the ballot played an important role in how people voted voting machine elections were much more likely than paper ballots to result in rejections of the recommendations of school boards and produced much greater dispersion of expressed preferences

financial intermediation business failures and real business cycles in this paper a general equilibrium business cycle model is construct ed that when subjected to real disturbances mimics observed qualita tive comovements among real output money business failures risk pr emia intermediary loans and prices in contrast monetary disturban ces generate cycles that have several inconsistencies with empirical evidence thus providing support for real business cycle theory at th e expense of monetary theories of the business cycle financial inter mediation arises endogenously in the model and intermediation matters for business cycle behavior a credit supply mechanism acts in tande m with an intertemporal substitution effect in propagating stochastic disturbances copyright 1987 by university of chicago press

the median voter model across levels of government the median voter model provides a method of aggregating individual voter s demands to obtain community demand although higher level governments are often assumed to be less responsive to voters than lower level governments it remains an open question whether or not the median voter model which has been found to apply to the lowest tier of the federalist system extends to higher level governments we use the cox specification test to find that the ad hoc model dominates the median model for counties and states the county results are sensitive to the time periods budgetary structure and degree of urbanization

co movement of public spending in the g7 abstract the size of government in the g7 countries in the last fifty years follows a common pattern see the left panel of fig 1 below it grows in the first three decades and then turns flat at the beginning of the nineties for all countries alike we highlight this common pattern in a dynamic factor model and argue that a satisfactory explanation for it would be desirable

does restricting choice in referenda enable governments to spend more if school boards represent the preferences of the median voter referendums to approve school expenditures should not constrain school expenditures if school boards would choose expenditures larger than the median voter s preference referendums that restrict voters to approving or disapproving a school board s recommended expenditure level will result in expenditures larger than the median voter would prefer however florida used a unique referendum system which guaranteed the median voter s most preferred outcome using florida education expenditures as a benchmark the evidence suggests that spending was slightly higher in restricted choice referendum states than in florida

too much conformity a hotelling model of local public goods supply abstract this paper considers a new dimension in the choice of local public goods quality the quality decision that is made by median voters in a hotelling model of product differentiation leads to too much conformity from a welfare point of view

a direct test of direct democracy new england town meetings representative democracies govern most locales in the us making it difficult to compare performance relative to direct democracy new england states however provide an opportunity to test both direct and representative democracy at the local level this article uses revealed preference axioms to compare spending patterns in new england towns and cities against median voter hypothesis benchmarks contrary to previous evidence we find no differences between direct and representative democracy the results suggest that horizontal competition arising from local fragmentation minimize differences between direct and representative local government providing support for wider applicability of median voter based empirical models of local government behaviour in the us

the role of demandable debt in structuring optimal banking arrangements demandable debt finance by banks warrants explanation because it entails costs of bank suspension liquidation and idle reserve holdings an explanation is developed in which demandable debt provides incentive compatible intermediation where the banker has comparative advantage in allocating investment funds but may act against the interests of uninformed depositors demandable debt attracts funds by giving depositors an option to force liquidation its usefulness in transacting follows from information sharing between monitors and nonmonitors copyright 1991 by american economic association

corporate finance and the monetary transmission mechanism we analyze the transmission effects of monetary policy in a general equilibrium model of the financial sector with bank lending and securities markets bank lending is constrained by capital adequacy requirements and asymmetric information adds a cost to outside bank equity capital in our model monetary policy does not affect bank lending through changes in bank liquidity rather it operates through changes in the spread of bank loans over corporate bonds which induce changes in the aggregate composition of financing by firms and in banks equity capital base the model produces multiple equilibria one of which displays all the features of a credit crunch this article is concerned with the monetary transmission mechanism through the financial sector in particular the banking sector and securities markets specifically it analyzes the effects of open market operations on bank lending and securities issues in a real economy by building on recent advances in the microeconomics of banking it provides some underpinnings for the credit view of monetary policy which in its simplest form relies on an exogenously assumed limited substitutability between bank loans and bonds the macroeconomics literature distinguishes between the money view and credit view of monetary policy transmission bernanke and blinder 1988 1992 the money view takes bonds and loans to be perfect substitutes and only allows for the effects of monetary policy on aggregate investment consumption and savings through changes in interest rates the credit view allows for an additional effect on investment and economic activity operating through bank credit supply

fiscal dynamics of local elected officials the fiscal behavior of local elected officials is examined in a dynamic model where officials maximize an intertemporal objective function in two stages officials first decide upon an optimal mix of revenue and expenditure and then minimize loss and adjustment cost functions the model is tested using data from the 20 most populated u s cities whose mayor was elected on a four year cycle the empirical results support the model fiscal behavior differs between cities and local fiscal decisions made by elected officials are in part dependent on the timing of elections

bank net worth asset prices and economic activity abstract a dynamic general equilibrium model is proposed to study the interactions between the banking sector asset prices and aggregate economic activity a durable asset serves as a productive input and as a collateral for loans the propagation mechanism of a negative productivity shock is enhanced and prolonged through the interaction of credit constraints and asset prices where the bank loan and the investment are squeezed by a higher bank capital asset ratio for lending and at the same time a stricter collateral requirement for borrowing the model explains why banking crises often coincide with depression in the asset markets the results also bear policy implications for the debates over regulatory bank capital adequacy and credit control policies

the median voter model in public choice theory the changing perception by public choice theorists about the relevance of the median voter model is a result of excessive extrapolation of the conclusions of theoretical models to the real world early in the 1970s the median voter model was often accepted as implying that the output produced in the public sector was what was most preferred by the median voter this claim is excessive because the median voter model is only a model of demand aggregation under majority rule and has little to say about the supply side of the public sector in the late 1970s many scholars identified several circumstances under which the model would not apply in theory but these critiques of the model were often viewed as reasons to abandon the median voter model altogether the model went from having excessive claims that made the model appear to be more powerful than it really is to excessive claims that made the model appear to be less powerful than it really is these latter claims were often in response to the earlier claims rather than to the model appropriately applied

the flypaper effect identifying areas for further research the flypaper effect literature dates back three decades it is overwhelmingly neo classical in approach attempting to improve the median voter demand model and or temper it with public choice supply side perspectives whilst this approach provided valuable early substantial analytical insights more recent papers seem to have contributed only marginally to an understanding of the flypaper effect if indeed it exists at all hence as well as providing a long overdue comprehensive review of the literature on the flypaper effect this paper identifies more productive avenues for further research

monopolistic competition and the effects of aggregate demand how important is monopolistic competition to an understanding of the effects of aggregate demand on output we ask the question at three levels can monopolistic competition by itself explain why aggregate demand movements affect output can it together with other imperfections generate effects of aggregate demand in a way that perfect competition cannot if so can it give an accurate account of the response of the economy to aggregate demand movements the answers are no yes and yes

why so much stability one of duncan black s 1958 more important contributions was a classically simple proof that with complex issues and majority voting a stable outcome is unlikely this very simple proof that there would normally be no motion which can get a majority against all others and hence that any possible outcome is dominated by another has been elaborated and made more precise by later work without most improbable conditions endless cycling would be expected this is particularly true when logrolling is present as it normally is if we look at the real world however we observe not only is there no endless cycling but acts are passed with reasonable dispatch and then remain unchanged for very long periods of time thus theory and reality seem to be not only out of contact but actually in sharp conflict it is the purpose of this article to demonstrate that our existing theory when properly looked at does indeed imply a relatively stable outcome to voting in some cases however this stability will not be a true equilibrium because a random member of a large set will be chosen and then that random outcome will be left unchanged for long periods of time it does not dominate all other outcomes but is retained merely because of its particular history there are already several possible explanations for the observed stability in the literature we will take them up as they become relevant to the general line of reasoning i should however warn the reader that my own previous work including joint work with buchanan will play a major role here this may simply reflect egotism but i think that some of the early work which is now partially forgotten can provide solutions for more modern problems much recent public choice work has involved spatial models and these models frequently ignore logrolling the reason presumably is that it is very hard to put logrolling in a two dimensional diagram we shall begin considering such special models and assume that the issues are the sort that does not lead to logrolling and then turn to more complex logrolling problems with respect to the first situation in which logrolling does not occur there is already one possible explanation for the observed stability in the literature

a tale of two unions divergent platforms and their constituencies the median voter theorem has regularly been used in economics to represent the behaviour of teachers unions little empirical work however tests whether this framework is a good fit for teachers

the median voter hypothesis evidence from general purpose local governments the median voter hypothesis mvh represents a much used as well as much criticized tool in the hands of public finance economists to evaluate the mvh this paper applies the cox specification test using data from general purpose municipal governments the cox test allows for possible simultaneous rejection of the mvh and all tested models thus providing stricter criteria than applied to date in empirical mvh analyses the test results reveal that the mvh is appropriate for explaining the aggregate behavior of municipal governments but not specific services further the single service and single tax base assumptions are not critical to the empirical mvh performance

the role of interbank markets in monetary policy a model with rationing the empirical research on monetary transmission has reported a number of puzzles challenging extant theoretical models of the transmission mechanism in this paper we argue that asymmetric information in the interbank market may be important to have a better understanding of the mechanisms at work in the transmission process we show that asymmetric information may induce an equilibrium with rationing this in turn has two major implications first it reconciles the apparent irresponsiveness of business investment to the user cost of capital with the large impact of monetary policy magnitude puzzle and second it shows that this impact will not be limited to short term credit supply but will also affect long term lending even if the corresponding interest rate is unaffected composition puzzle

incomplete information income redistribution and risk averse median voter behavior this paper extends the median voter model to include risk aversion an expected utility maximizing median voter with an aversion to risk may behave differently than a median voter who is certain a referendum on income redistribution from the top of the distribution to the bottom which fails when the median voter is certain may pass in the extended median voter model economic inefficiencies and the net losses accompanying redistribution are shown to play a pivotal role in determining the behavior of the risk averse median voter the model is illustrated using a one percent demogrant redistribution

destructive effects of constructive ambiguity in risky times unclear bailout policy underinvestment and calls for greater responsibility by bankers are some of the observations from the recent financial crisis the paper explains underinvestment as an inefficient equilibrium under ambiguous bailout policy agents suffer from a lack of information about the insolvency resolution methods the beliefs of bankers regarding whether an insolvent bank is liquidated may differ from those of depositors even if bankers and depositors possess absolutely symmetric information about the economy this disrupts the flow of funds through the banking channel if the investment climate is characterized by high aggregate risk the paper suggests policy implications aimed at a reduction of the anxiety of agents and at aligning their beliefs to restore efficiency

incumbency effects in political campaigns in this paper we examine two effects of incumbency first an incumbent may have an advantage in creating a favorable image in the eyes of the voters second the incumbent may have to chose a position before the challenger this second aspect of incumbency is modelled as stackelberg leadership in the model two candidates run for election by choosing a position in an ideological spectrum voters care about candidates chosen positions as well as non policy attributes of candidates which we call charisma charismata are not known when candidates choose policy positions they are only revealed on election day so that winning is not usually a certain prospect candidates care about the probability of winning but they also dislike compromising their own ideals

do cio it budgets explain bigger or smaller governments theory and evidence from u s state governments given the recent concern on big governments and rising budget deficits in the united states and european nations there has been a fundamental economic debate on the proper boundary and role of governments in a society inspired by this debate we study the relationship between information technology it and government size drawing on a broad range of the literature from multiple disciplines such as information systems industrial organization and political sciences we present several theoretical mechanisms that explain the impact of it on government expenditures using a variety of data on it spending and state government expenditures we find that greater it investments made by a state chief information officer cio are associated with lower state government spending it is estimated that on average a 1 increase in state cio budgets is associated with a reduction of as much as 3 49 in state overall expenditures this study contributes to the literature by identifying a key technological factor that affects government spending and showing that it investments can be a means to restrain government growth