Two Approaches To Estimating Public Expenditures

Abstract

Traditionally, the demand for public expenditures has been estimated using for explanatory variables the average values of per capita income, as well as other variables. The results of this approach are disappointing, due to the lack of a theoretical basis. The public choice model, on the other hand, uses the political decision-making process (median voter model) to explain expenditures. Taking the same set of data, it can be shown that the public choice approach yields superior results. It also offers a solution to the unfruitful discussion about the influence of "political" determinants of public expenditures