Asymmetries in the Growth of Governments

The growth of governments has traditionally been modelled within a welfare-driven context, where citizens/taxpayers increase their demand for publicly-provided goods and services in response to economic growth. However, the underlying linear approach does not consider the crisis intervention function of government spending that increases following contractions, rather than expansions, in domestic income. Our results point to a consistent counter-cyclical use of non-systematic government consumption expenditure.We also provide evidence of an upward bias in both discretionary and non-systematic government spending that can help explain the relevant growth of the Italian public sector.