capital government expenditure (Goffman and Mahar, 1971, and Pryor, 1968). On the other hand, supply of government services may badly fail to meet the needs due to a rapid demographic changes (Brazer, 1959),8 General economic circumstances have been considered crucial since 1883, when Adolph Wagner suggested that, as an economy develops, the public sector (and consequently public spending) grows in relative importance. For example, industrialization, the ratio of manufacturing output to GDP, and market development tend to increase the amounts of government spending on education, research and development, health care and welfare. It is also commonly accepted that, as an economy develops, the relative importance of direct government provision of services, and thus the government's role as an employer falls, while other types of expenditure, such as transfers, become more important (Heller and Diamond, 1990); or that the more unequal is the distribution of income, the more police services may be desired (Pryor, 1968).9 The role of the detenminants of public expenditure may change over timne. For example, relationships between per capita GDP and government expenditure estimnated from time series usually differ from those estimated by cross-section. Low income countries today do not operate under the same technical, political, and value conditions as prevailed in the past when now developed countries were at similar low levels of income (Musgrave, 1969).10 ° The extensive analysis of Heller and Diamond (1990) showed that: (i) The relative size of the non-adult population (as well as the percent of pupils reaching grade six has a positive and statistically significant influence on the size of gg expenditure on education. (ii) Surprisingly, birth and population growth rates and the size of the dependent population do not exercise any statistically significant influence of government health care expenditure. (iii) Old age dependency ratio and the proportion of labor force in manufacturing dominantly influence expenditure on welfare. Since private sector takes up unemployment pay and sickness and injury benefits for the higherincome countries, there is not a strong relationship between welfare expenditure and pro capita GDP. And, (iv) urban growth negatively affects public health care expenditure.

9 Analysis of 1950s-60s expenditure data with respect to per capita GDP for socialist and non-socialist countries showed that expenditure on research and development, and external security was higher in the socialist countries. The "socialism dummy", however, was not significant for expenditure on education, health and welfare (Pryor, 1968).

10 One of the reasons is development of new technologies. The impact of technology on government spending occurs directly through, for instance, an increasing demand for road construction and complementary services, and/or less directly through the subsequent greater mobility of the population and the exodus from the town to the suburbs, with resulting heavy social capital requirements (13iehl, Roskamp, and Stolper, 1983, and Heller and Diamond, 1990). Similarly to the Wagner's hypothesis, also the hypothesis about a productivity-lag (of 12