Internationales Institut für Umwelt und Gesellschaft (IIUG) International Institute for Environment and Society Wissenschaftszentrum Berlin IIUG pre 86-^

IIUG pre 86-^

THE DETERMINANTS OF STRUCTURAL CHANGE IN PUBLIC BUDGETS:

A THEORETICAL AND EMPIRICAL ANALYSIS FOR THE FEDERAL REPUBLIC OF GERMANY*

by

Frank G. Müller and Klaus Zimmermann

Concordia University Montreal and University of the Federal Armed Forces/

Science Center Berlin.

* The authors are grateful for helpful comments received on earlier drafts from G. Engelhardt (Hamburg), D. Fürst (Han­

nover), K.-H. Hansmeyer (Cologne), A. Wildavsky (Berkeley), and two anonymous referees.

To be published in: European Journal of Political Research, 1986.

IIUG, Potsdamer Str. 58, 1000 Berlin 30, Tel.: 030 - 26 10 71

k a n n , z i e l t d i e s e r A r t i k e l in e i n e r e r s t e n S t u f e a u f die H e r a u s a r b e i t u n g d e r D e t e r m i n a n t e n d e r B u d g e t s t r u k t u r u n d i h r e r V e r ä n d e r u n g e n . I m K o n t e x t d e r E n t w i c k l u n g e i n e r s o l ­ c h e n T h e o r i e w ä r e es s c h o n als e i n w i c h t i g e r S c h r i t t a n z u ­ sehen, w e n n d i e V a r i a b l e n i d e n t i f i z i e r t w e r d e n k ö n n t e n , die s t r u k t u r e l l e V a r i a t i o n e n u n t e r v e r s c h i e d e n e n Z e i t h o r i ­ z o n t e n u n d b e z o g e n a u f v e r s c h i e d e n e E b e n e n d e r s t a a t l i c h e n O r g a n i s a t i o n e r k l ä r e n k ö n n t e n . F ü r e i n e s o l c h e E r k l ä r u n g s t r u k t u r e l l e r Ä n d e r u n g e n e r s c h e i n e n s o z i o - ö k o n o m i s c h e p o l i ­ t i s c h e u n d i n s t i t u t i o n e i l e V a r i a b l e n b e s o n d e r s g e e i g n e t zu sein. D i e s e s V a r i a b l e n s e t w i r d h i e r e m p i r i s c h für D a t e n d e r B u n d e s r e p u b l i k i m Z e i t r a u m 1964 — 1978 u n t e r s u c h t . D i e R e s u l t a t e s i n d d a b e i s e h r ä h n l i c h zu d e n e n d e r USA: In v e r ­ g l e i c h b a r e n t w i c k e l t e n N a t i o n e n m i t ä h n l i c h e r f ö d e r a l e r S t r u k t u r s p i e l e n i n s t i t u t i o n e l l e F a k t o r e n d i e b e h e r r s c h e n d e R o l l e b e i d e r E r k l ä r u n g v o n V e r ä n d e r u n g e n in d e r b u d g e t ä r e n S t r u k t u r .

S U M M A R Y

S i n c e t h e r e is n o g e n e r a l l y a c c e p t e d a n d s a t i s f a c t o r y t h e o r y t h a t c a n e x p l a i n s t r u c t u r a l c h a n g e s in p u b l i c b u d g e t s o v e r time, this a r t i c l e f o c u s e s o n the d e t e r m i n a n t s of t h e b u d ­ g e t s t r u c t u r e a n d its c h a n g e s o v e r time. Thus, i t w o u l d a l ­ r e a d y b e an i m p r o v e m e n t in the d e v e l o p m e n t of a c o m p l e x a n d c o h e r e n t t h e o r y o f b u d g e t a r y s t r u c t u r e s a n d its c h a n g e s if i n i t i a l l y a p p r o p r i a t e v a r i a b l e s c o u l d b e i d e n t i f i e d w h i c h c o u l d e x p l a i n i n the short, i n t e r m e d i a t e a n d l o n g runs the s t r u c t u r a l c h a n g e s in p u b l i c b u d g e t s w i t h r e s p e c t to the v a r i o u s g o v e r n m e n t a l l evels. P o t e n t i a l c a n d i d a t e s for e x ­ p l a i n i n g s t r u c t u r a l c h a n g e s c o u l d b e s o c i o - e c o n o m i c , p o l i ­

t i c a l a n d i n s t i t u t i o n a l v a r i a b l e s . T h e s e sets of v a r i a b l e s are a n a l y z e d h e r e in d e t a i l for t h e F e d e r a l R e p u b l i c of G e r m a n y f o r the t i m e p e r i o d 1964 - 1978. T h e r e s u l t s are v e r y s i m i l a r to t h o s e f o u n d in v a r i o u s U.S. stud i e s : In • c o m p a r a b l y d e v e l o p e d n a t i o n s w i t h s i m i l a r p o l i t i c a l ( f e d e ­ ral) s t r u c t u r e s i n s t i t u t i o n a l f a c t o r s s e e m to p l a y the d o ­ m i n a n t r o l e in d e t e r m i n i n g a n d e x p l a i n i n g c h a n g e s i n the b u d g e t a r y s t r u c t u r e .

P r e s e n t l y , t h e r e is no g e n e r a l l y accepted, a n d s a t i s f a c t o r y t h e o r y t h a t c a n e x p l a i n s t r u c t u r a l c h a n g e s in p u b l i c b u d g e t s o v e r time. M o s t of the e x i s t i n g a p p r o a c h e s , for e x a m p l e , b y W a g n e r (1911) a n d his l a w of e x p a n d i n g g o v e r n m e n t a c t i v i t i e s , b y T i m m (1961) a n d his l a g - t h e o r y , or b y P e a c o c k a n d W i s e m a n

(1961) a n d t h e i r d i s p l a c e m e n t e f f e c t of g o v e r n m e n t e x p e n d i ­ t u r e s d u r i n g p e r i o d s of c r i s e s , a r e p r i m a r i l y c o n c e r n e d w i t h e x p l a n a t i o n s o f the l o n g - t e r m g r o w t h of p u b l i c e x p e n d i t u r e

1

a n d its s h a r e of n a t i o n a l i n c o m e a n d o n l y s e c o n d a r i l y c o n c e r n e d w i t h the a n a l y s i s o f s h o r t - r u n a n d i n t e r m e d i a t e s t r u c t u r a l d e v e l o p m e n t s o f p u b l i c e x p e n d i t u r e s in the c o n t e x t o f c h a n g e s in i n d i v i d u a l e x p e n d i t u r e s c o m p o n e n t s in r e l a t i o n to the t o t a l b u d g e t (for a n e x c e l l e n t s u r v e y see: R e c k t e n w a l d

1977) .

In c o n t r a s t to t h e s e l o n g - r u n a p p r o a c h e s , t h e r e are some s h o r t - r u n c o n c e p t s a v a i l a b l e too, w h i c h e x p l a i n t h e s h o r t - r u n r e l a t i v e c o n s t a n c y of t h e b u d g e t a r y s t r u c t u r e , n a m e l y , the c o n ­ c e p t of i n c r e m e n t a l i s m . L i n d b l o m (1959) d e v e l o p e d t h i s c o n c e p t o n the a s s u m p t i o n th a t a s u c c e s s i v e and l i m i t e d c o m p a r i s o n of p o l i t i c a l a l t e r n a t i v e s a p p e a r s to be m o r e r a t i o n a l a n d m a n a g e ­ a b l e t h a n c o m p r e h e n s i v e a n a l y s i s a n d n e w f o r m u l a t i o n of p o l i c y p r o g r a m m e s . A c c o r d i n g to L i n d b l o m , " m u d d l i n g t h r o u g h " is

n o t o n l y an a p p r o p r i a t e d e s c r i p t i o n of w h a t f r e q u e n t l y h a p p e n s in a p l u r a l i s t i c society, b u t a l s o of w h a t "should" tak e p l a c e

( E n g e l h a r d t 1970, P r e m f o r s 1981).

T h e c o n c e p t u a l a s p e c t s of i n c r e m e n t a l i s m w e r e d e v e l o p e d f u r t h e r by W i l d a v s k y a n d a p p l i e d to the b u d g e t a r y p r o c e s s

( W i l d a v s k y 1964, 1965). In t h i s conte x t , i n c r e m e n t a l i s m s t a t e s t h a t c h a n g e s in i n d i v i d u a l p u b l i c e x p e n d i t u r e p r o g r a m m e s

a r e o n l y of i n c r e m e n t a l o r m a r g i n a l n ature, and, h e n c e , t h e b u d g e t a r y p r o c e s s in a n y f i s c a l y e a r is b e s t u n d e r s t o o d as l a r g e l y a r e v i s i o n of p r e v i o u s b u d g e t s . Thi s m e a n s t h a t the s i z e a n d s h a r e of a n i n d i v i d u a l p u b l i c e x p e n d i t u r e in the p r e ­ s e n t b u d g e t is p r e d o m i n a n t l y i n f l u e n c e d b y its s i z e a n d s h a r e in t h e p r e v i o u s bu d g e t . T h e o u t c o m e , h o w e v e r , r e f l e c t s a c o m ­ p l e x p o l i t i c a l b e h a v i o r a l p a t t e r n a n d s t r a t e g y of the agents in v o l v e d in the b u d g e t a r y p r o c e s s . T h e i n t e r p l a y of t h e s e f o r c e s r e s u l t s in the r e l a t i v e s t a b i l i t y of the b u d g e t a r y s t r u c t u r e

( D a v i s / D e m p s t e r / W i l d a v s k y 1966). D e s p i t e the a p p a r e n t s h o r t ­ c o m i n g s of the i n c r e m e n t a l a p p r o a c h ( B a i l e y / 0 'C o n n o r 1975; Le- l o u p 1978a), it n e v e r t h e l e s s r e m a i n e d the a c c e p t e d b u d g e t a r y ap p r o a c h . T h i s is a l i t t l e s u r p r i s i n g , s i nce it o n l y e x p l a i n s the s h o r t - r u n s t a b i l i t y of t h e b u d g e t a n d its s t r u c t u r e a n d p r o ­ v i d e s no e x p l a n a t i o n of n o n - i n c r e m e n t a l s t r u c t u r a l c h a n g e s a n d s h i f t s a m o n g t h e v a r i o u s e x p e n d i t u r e c o m p o n e n t s . In p a r t i c u l a r , t h e l a t t e r a s p e c t s c o u l d h a v e b e e n r e l a t i v e l y e a s i l y a c c o m m o ­ d a t e d b y t h e p r o p o n e n t s o f i n c r e m e n t a l i s m b y r e a l i z i n g t h a t a n n u a l i n c r e m e n t a l c h a n g e s in v a r i o u s p u b l i c e x p e n d i t u r e c o m p o ­ n e n t s r e s u l t in n o t i c e a b l e b u d g e t a r y s h i f t s o v e r t i m e (Rose/

P a g e 1981). D e s p i t e t h e s e r e s e r v a t i o n s , i n c r e m e n t a l i s m c a n b e u s e d as a r e f e r e n c e t h e o r y for e x p l a i n i n g b u d g e t a r y s t r u c t u r a l c h a n g e s o v e r time. W h a t is n e e d e d is an a p p r o a c h a d e q u a t e for e x p l a i n i n g m i d - t e r m c h a n g e s of t h e b u d g e t a r y e x p e n d i t u r e p a t ­ tern, a n d thus, to e s t a b l i s h a l i n k b e t w e e n the s t a t e m e n t of

t h e l o n g r u n t r e n d of p u b l i c e x p e n d i t u r e g r o w t h a n d the s h o r t r u n s t a b i l i t y o f t h e e x p e n d i t u r e p a t t e r n .

In this c o n t e x t , the q u e s t i o n i m m e d i a t e l y a r i s e s as to w h a t e x t e n t t h e e c o n o m i c t h e o r y of d e m o c r a c y (Downs 1957) or the

"Ne w P o l i t i c a l E c o n o m y " (Frey 1978) can p r o v i d e s u c h a m i d ­ t e r m a p p r o a c h , w h i c h c o u l d e x p l a i n the b u d g e t a r y b e h a v i o r d u r i n g a g i v e n l e g i s l a t i v e p e r i o d . A t a c o n c e p t u a l level, it is c o n c e i v a b l e t h a t t h e p u b l i c e x p e n d i t u r e s o f f e r e d b y the p o l i t i c a l p a r t i e s as a c t o r s a r e r a n k e d a c c o r d i n g to t h e i r d i ­ m i n i s h i n g m a r g i n a l v o t e g a i n s a n d a r e f i n a n c e d r e s p e c t i v e l y a c ­ c o r d i n g to t h e i r m a r g i n a l i n c r e a s i n g v o t e losses, i.e., the e x p e n d i t u r e s a r e f i n a n c e d b y les s a n d less p o p u l a r taxes. T h e r e s u l t i n g b u d g e t a r y s t r u c t u r e is v i e w e d b y t h e r e s p e c t i v e p o l i t i c a l p a r t y as o p t i m a l in its s e a r c h for g a i n i n g the p o l i t i c a l m a j o r i t y . S i n c e t h e e m p i r i c a l t e s t i n g of t h e s e m o d e l s is r a t h e r d i f f i c u l t , o n l y c a u t i o u s a t t e m p t s w e r e m a d e to a p p l y t h e m in r e a l i t y (cp. S c h ü r g e r s 1980). F o r e x a m p l e , t h e a n a l y s i s of p o ­ l i t i c a l " b u s i n e s s c y c l e s " r e s t r i c t s i t s e l f to an e x p l a n a t i o n of

p o l i t i c a l l y g e n e r a t e d f l u c t u a t i o n s of e c o n o m i c a c t i v i t y a n d of p u b l i c e x p e n d i t u r e s a n d r e v e n u e s , b u t it is h a r d l y f o c u s s i n g on, b u d g e t size a n d its s t r u c t u r e . In v i e w of t h e e x i s t i n g l e ­ v e l of i n f o r m a t i o n a n d of the a b s o r p t i o n c a p a c i t y o f v o t e r s a n d p o l i t i c i a n s , t h e c o n f i d e n c e in the a l l o c a t i o n m e c h a n i s m

" e l e c t i o n p r o c e s s " as a r e f l e c t i o n of the m e d i a n

v o t e r ' s p r e f e r e n c e a p p e a r s to be r a t h e r h e r o i c . T h e t r a n s m i s ­ s i o n of d e s i r a b l e i m a g e s o f p o l i t i c i a n s a n d of p o l i t i c a l s l o ­ g a n s a s s o c i a t e d w i t h " s t a b i l i t y " , " c o n f i d e n c e " , " d e c i s i v e n e s s "

a n d " s t r e n g t h " m a y l e a d to an e l e c t i o n v i c t o r y , b u t the s u p p l y

of p u b l i c g o o d s and, t h e r e f o r e , the b u d g e t a r y s t r u c t u r e is u n ­ l i k e l y to b e d i r e c t l y i n f l u e n c e d a n d c o n t r o l l e d b y the v o t e r s

( M a c k s c h e i d t 1973, p. 286). C o n s e q u e n t l y , t h e e x p l a n a t o r y v a ­ lue o f t h e v o t e - m a x i m i z i n g h y p o t h e s i s a n d the e c o n o m i c t h e o r y of d e m o c r a c y c o n c e r n i n g t h e b u d g e t s t r u c t u r e a n d its d e v e l o p ­ m e n t is r e l a t i v e l y l i m i t e d t o s t r e s s i n g t h e i m p o r t a n c e of p o l i ­ t i c a l p r o c e s s e s for a p o s i t i v e a l l o c a t i o n t h e o r y of p u b l i c

e x p e n d i t u r e s . Thus, it w o u l d a l r e a d y be a n i m p r o v e m e n t in t h e d e v e l o p m e n t of a c o m p l e x a n d c o h e r e n t t h e o r y of b u d g e t a r y s truc t u r e s a n d its c h a n g e s if i n i t i a l l y a p p r o p r i a t e v a r i a b l e s c o u l d b e i d e n t i f i e d , w h i c h c o u l d e x p l a i n in the s h o r t , i n t e r m e d i a t e a n d l o n g runs, t h e s t r u c t u r a l c h a n g e s in p u b l i c budg e t s , w i t h r e s p e c t to the v a r i o u s g o v e r n m e n t a l levels. P o t e n t i a l c a n d i ­ d a t e s for s u c h a t h e o r y c o u l d b e s o c i o - e c o n o m i c , p o l i t i c a l a n d i n s t i t u t i o n a l v a r i a b l e s ( D y e / R o b e y 1980) w h i c h w i l l be a n a l y z e d b e l o w in d e t a i l a n d u t i l i z e d as e l e m e n t s o f a n e m p i r i c a l l y

t e s t a b l e theory.

I I . D e t e r m i n a n t s o f B u d g e t a r y S t r u c t u r e a n d Its C h a n g e s

L i t t l e e x p e r t i s e is r e q u i r e d to r e c o g n i z e t h a t p u b l i c e x ­ p e n d i t u r e s h a v e b e e n i n c r e a s i n g o v e r time. T h i s t r e n d is s t i l l a p o p u l a r s u b j e c t of d i s c u s s i o n a m o n g e c o n o m i s t s a n d p o l i t i c a l s c i e n t i s t s . S e v e r a l m o d e l s a n d n u m e r o u s f a c t o r s w e r e h y p o t h e ­ s i z e d as e x p l a n a t o r y d e t e r m i n a n t s of b u d g e t size, s t r u c t u r e a n d of its c h a n g e s o v e r t i m e .

1. T h e S o c i o - E c o n o m i c V a r i a b l e s

In p a r t i c u l a r , T h o m a s R. D y e (1966) s t r e s s e s s o c i o - e c o n o m i c f a c t o r s as d e t e r m i n a n t s o f p u b l i c e x p e n d i t u r e s . His o b j e c t i v e

is to i l l u s t r a t e the g o v e r n m e n t ' s d e p e n d e n c e o n e c o n o m i c f a c t o r s in t h e s o c i e t y a n d to s h o w t h a t the g o v e r n m e n t p o s ­ s e s s e s l i t t l e or n o a u t o n o m y in its a c t i v i t i e s . It is not i n ­ t e n d e d h e r e t o v e r i f y of f a l s i f y t h i s h y p o t h e s i s , b u t r a t h e r to e x t r a c t f r o m t h i s a p p r o a c h some f a c t o r s w h i c h c a n be u s e d for t h e d e v e l o p m e n t of a t e s t a b l e t h e o r y of b u d g e t s t r u c t u r e s a n d its c h a n g e s .

(1) T h e n a t i o n a l i n c o m e a n d its g r o w t h r a t e r e p r e s e n t i m ­ p o r t a n t d e t e r m i n a n t s o f p u b l i c e x p e n d i t u r e s . Thi s re- 2 lates to W a g n e r ' s l a w of e x p a n d i n g s t a t e a c t i v i t i e s . (2) S o m e e m p i r i c a l s t u d i e s h a v e s u g g e s t e d t h a t a h i g h d e ­

g r e e of i n t e r n a t i o n a l t r a d e d e p e n d e n c e m a y c o n t r i b u t e to the g r o w t h o f p u b l i c e x p e n d i t u r e s (Cam e r o n 1978). F o l ­ l o w i n g t h e fac t t h a t the g o v e r n m e n t c a n n o t p u r s u e n e o ­

m e r c a n t i l i s t s t r a t e g i e s e s p e c i a l l y in s m a l l o p e n e c o ­ n o m i e s , it h a s to t a k e o v e r s o m e r e s p o n s i b i l i t y to m a i n ­ t a i n a n d / o r i m p r o v e t h e c o u n t r y ' s i n t e r n a t i o n a l c o m p e - t i v e n e s s and, t h e r e f o r e , is r e q u i r e d t o d e s i g n a n d i m ­ p l e m e n t e x p e n d i t u r e p r o g r a m m e s for i n c o m e m a i n t e n a n c e a n d s u p p o r t w h i c h m a y i n c l u d e e x p e n d i t u r e s for s o c i a l s e c u r i t y , e d u c a t i o n a n d r e s e a r c h , s u b s i d i z a t i o n of job- c r e a t i n g p r o g r a m m e s , etc.

(3) T h e u n e m p l o y m e n t r a t e is a t h i r d f a c t o r i n f l u e n c i n g the s i z e a n d c o m p o s i t i o n of p u b l i c e x p e n d i t u r e s (Davis/

D e m p s t e r / W i l d a v s k y 1974). S i n c e the a c h i e v e m e n t of full e m p l o y m e n t r a n k s h i g h in the g o v e r n m e n t ' s p r i o r i t y list, v a r i o u s e m p l o y m e n t c r e a t i n g e x p e n d i t u r e p r o g r a m m e s are r e f l e c t e d in t h e p u b l i c budget.

(4) T h e m a n o e v r a b i l i t y for an e x p a n s i o n 'of p u b l i c ex-

p e n d i t u r e a c t i v i t i e s is a l s o d e t e r m i n e d b y the p r o d u c ­ t i o n s t r u c t u r e a n d c a p a c i t y o f t h e e c o n o m y , i.e., by the e l a s t i c i t y of the p r o d u c t i o n s e c t o r . C o n s e q u e n t l y , g o v e r n m e n t p r o g r a m m e s c a n n o t b e i m p l e m e n t e d if the e c o ­ n o m y ' s p r o d u c t i o n s t r u c t u r e c o n t a i n s b o t t l e n e c k s a n d is i n f l e x i b l e to a c c o m m o d a t e p u b l i c d e m a n d s (Leloup 1978b).

(5) F i n a l l y , the age c o m p o s i t i o n of t h e p o p u l a t i o n al s o c a n b e c o n s i d e r e d as a d e t e r m i n a n t for s p e c i f i c p u b l i c e x ­ p e n d i t u r e s p r o g r a m m e s . A b a b y - b o o m f o l l o w i n g the end of a w a r m a y r e q u i r e v e r y s p e c i f i c g o v e r n m e n t a l e x p e n d i t u r e s . F o r e x a m p l e , as thi s b a b y - b o o m c o h o r t m o v e s through the popu­

l a t i o n p y r a m i d , s p e c i f i c p u b l i c d e m a n d s h a v e to b e s a ­ t i s f i e d , s u c h as h i g h e r p u b l i c e x p e n d i t u r e s for e d u c a ­ tion, s p o r t s , s o c i a l s e c u r i t y , etc. ( H o l c o m b e / Z a r d k o o h i 1 9 8 0 /81).

2. P o l i t i c a l V a r i a b l e s

B e s i d e s t h e s o c i o - e c o n o m i c v a r i a b l e s , p o l i t i c a l f a c t o r s m a y a l s o b e s i g n i f i c a n t in i n f l u e n c i n g the s t r u c t u r e of p u b ­

lic e x p e n d i t u r e s .

(1) E x p e n d i t u r e s a r e to be e v a l u a t e d n o t o n l y a c c o r d i n g to t h e i r e c o n o m i c impa c t s , b u t a l s o w i t h r e s p e c t to t h e i r p o l i t i c a l i m p a c t s i.e., a c c o r d i n g to t h e i r c h a r a c t e r i s ­ t i c s o f u s e f u l n e s s for t h e r e c i p i e n t s . T h e v a r i a b l e suggests

that individual expenditures will increase if the political benefits are m o r e v i s i b l e t h a n t h e costs, i.e., t h e taxes, and, thus .the competincf p a r t i e s a r e e x p e c t i n q to' g a i n a n d / o r

to m a i n t a i n t h e i r s u p p o r t w i t h i n the e l e c t o r a t e (Klein 1976) Thus, t h e c o n c e p t of p o l i t i c a l v i s i b i l i t y , i n c l u d i n g its fea t u r e s o f c e r t a i n t y a n d g e n e r a l i t y , is useful in explaining the

type, as w e l l as the l e v e l a n d s t r u c t u r e , of p u b l i c e x ­ p e n d i t u r e s o n v a r i o u s p r o g r a m m e s .

(2) A n a d d i t i o n a l v a r i a b l e among t h e p o l i t i c a l d e t e r m i n a n t s is the d e g r e e of c o n t r o l l a b i l i t y of p u b l i c e x p e n d i t u r e s . M a n y d e c i s i o n - m a k e r s r e f e r to the fac t t h a t a l a r g e a n d p o t e n t i a l l y g r o w i n g p o r t i o n of the p u b l i c e x p e n d i t u r e s is c o n s i d e r e d as " u n c o n t r o l l a b l e s ", i.e., this p o r t i o n is b e y o n d t h e a n n u a l d i s c r e t i o n of the d e c i s i o n m a k e r s . D e s p i t e s o m e v a g u e n e s s in t h e c o n t r o l l a b l e / u n c o n t r o l l a b l e d i c h o t o m y , s o m e p u b l i c e x p e n d i t u r e s c a n be i d e n t i f i e d w i t h c e r t a i n t y as u n c o n t r o l l a b l e c o m p o n e n t s . T h i s c a t e ­ g o r y i n c l u d e s f i x e d c o s t s (e.g., i n t e r e s t p a y m e n t s on

p u b l i c d e b t s ) , m u l t i - y e a r c o n t r a c t s a n d o b l i g a t i o n s (e.g. , l a r g e - s c a l e g o v e r n m e n t p r o j e c t s ) , a n d v a r i o u s e n t i t l e m e n t p r o g r a m m e s (e.g., s o c i a l s e c u r i t y , m e d i c a r e , p e n s i o n p a y m e n t s , etc.).

(3) P r o b a b l y , t h e m o s t i m p o r t a n t f a c t o r w i t h i n the s e t of p o l i t i c a l d e t e r m i n a n t s is t h e p o l i t i c a l p r e f e r e n c e . A c ­ c o r d i n g t o e m p i r i c a l s t u d i e s a n d c o n t r a r y to h y p o t h e s i s of t h e " d e c l i n e of i d e o l o g y " (Lipset 1960), p o l i t i c a l

p r e f e r e n c e s a r e i m p o r t a n t in i n f l u e n c i n g the d e v e l o p m e n t a n d the c o m p o s i t i o n of p u b l i c e x p e n d i t u r e s . T h e p o l i t i c a l p o s i t i o n o f a g o v e r n m e n t is a s s o c i a t e d w i t h the r a t e of e x p a n s i o n a n d ty p e of programmes. W h e t h e r a c o u n t r y 's g o v e r n ­ m e n t is g e n e r a l l y d o m i n a t e d b y a l e f t i s t or b y a c o n s e r v a -

;t i v e p a r t y p r o v i d e s an i m p o r t a n t h i n t to the r e l a t i v e d e ­ c r e e of c h a n g e in t h e siz e and s t r u c t u r e of t h e p u b l i c b u d g e t (Schmidt 1 982).

(4) R e l a t e d to the political preferences (government, parties, voters)

•is the f a c t o r of i n t e r e s t g r o u p s o r g a n i z a t i o n a n d its i n f l u e n c e o n the g o v e r n m e n t : s o c i a l i s t a n d / o r s o c i a l d e ­ m o c r a t i c p a r t i e s p r e d o m i n a n t l y r e c e i v e t h e i r s u p p o r t f r o m the w o r k i n g c l a s s a n d t r a d e u n i o n s , w h i l e l i b e r a l a n d / o r c o n s e r v a t i v e p a r t i e s r e l y r e l a t i v e l y s t r o n g e r o n the s u p ­ p o r t f r o m b o u r g e o i s p a r t s of t h e v o t e r s . V a r i o u s i n t e r e s t gr o u p s , e.g., e m p l o y e r s ' a s s o c i a t i o n s a n d t r a d e - u n i o n s , m a y e x e r c i s e d i f f e r e n t d e g r e e s of p r e s s u r e on g o v e r n m e n t ' s p r o g r a m m e s . T h e s t r e n g t h of t h e s e g r o u p s m a y b e o p e r a t i o n s l i z e d as a f u n c t i o n of v a r i o u s v a r i a b l e s w h i c h m a y i n c l u d e f a c t o r s s u c h as n u m b e r of m e m b e r s , f i n a n c i a l p o t e n t i a l , p r e s t i g e , b u t a l s o t h e p o s s i b i l i t y of t h r e a t a n d d i s t u r b ­ a n c e i.e., to q u e s t i o n a n d / o r t h r e a t e n the r e a l i z a t i o n a n d i m p l e m e n t a t i o n o f . p o l i t i c a l p r e f e r e n c e s of o t h e r g r o u p s

(Fürst 1975).

3. I n s t i t u t i o n a l - A d m i n i s t r a t i v e V a r i a b l e s

A t h i r d s e t of v a r i a b l e s for t h e e x p l a n a t i o n of the e x p a n ­ s i o n of p u b l i c e x p e n d i t u r e s i n v o l v e s the i n s t i t u t i o n a l - a d m i ­ n i s t r a t i v e s t r u c t u r e o f g o v e r n m e n t s .

(1) T h e s e n i o r i t y /size of a p a r t i c u l a r expenditure programme is an i n d i c a t o r for c o n f i r m i n g t h e i m p o r t a n c e of i n s t i t u t i o n a l - a d m i n i s t r a t i v e factors. It s u g g e s t s t h a t t h e r e is a b u i l t - in r e s i s t a n c e f r o m w i t h i n t h e g o v e r n m e n t a l i n s t i t u t i o n s to c h a n g e s in the e x i s t i n g b u d g e t a r y r e s o u r c e a l l o c a t i o n . F r e ­ q u e n t l y t h e s e e x p e n d i t u r e p r o g r a m m e s are m a n p o w e r - i n t e n ­ s i v e a n d / o r h i g h l y b u r e a u c r a t i z e d . In an i n t e r m e d i a t e a n d l o n g - r u n a n a l y s i s , h o w e v e r , it is to be e x p e c t e d t h a t o l d

a n d e s t a b l i s h e d p r o g r a m m e s w i l l a p p e a r as s t r u c t u r a l l y s t a g n a t i n g , if t h e y d o n o t s u c c e e d in a r t i c u l a t i n g a n d f o r m u l a t i n g n e w n e e d s a n d p r o g r a m m e s (Klein 1976, p. 427).

(2) W i t h r e s p e c t to the f a c t o r of a d m i n i s t r a t i v e f l e x i b i l i t y , it c a n b e a s s u m e d t h a t t r a n s f e r p a y m e n t p r o g r a m m e s - p r o ­ v i d e d t h e l e gal b a s i s is g i v e n - can be e a s i e r a n d f a ­ s t e r i m p l e m e n t e d t h a n p r o g r a m m e s t h a t r e q u i r e p u r c h a s e s of g o o d s a n d s e r v i c e s , p u b l i c tender, etc. In p a r t i c u l a r , i n v e s t m e n t p r o j e c t s h a v e to be a p p r o v e d and, t h e r e f o r e , h a v e l o n g e r t e c h n i c a l - a d m i n i s t r a t i v e p l a n n i n g a n d i m ­ p l e m e n t a t i o n lags. C o n s e q u e n t l y , d u e to t h e d i f f e r i n g lag s of i n v e s t m e n t e x p e n d i t u r e s in c o m p a r i s o n to t r a n s ­ f e r e x p e n d i t u r e s , a d i s c o n t i n u o u s p u b l i c e x p e n d i t u r e p a t t e r n emerg e s .

(3) A n a d d i t i o n a l a s p e c t of the i n s t i t u t i o n a l ~ a d m i n i s t r a t i v e v a r i a b l e s e t is t h e d e g r e e of f i s c a l c e n t r a l i z a t i o n . T h e v a r i a b l e of f i s c a l c e n t r a l i z a t i o n , d e f i n e d h e r e as the p e r c e n t a g e of a l l g o v e r n m e n t s ' r e v e n u e s s p e n t b y the c e n ­ t r a l g o v e r n m e n t , r e p r e s e n t s the f o r m a l i n s t i t u t i o n a l a d ­ m i n i s t r a t i v e s t r u c t u r e of t h e g o v e r n m e n t . A c c o r d i n g to t h e e c o n o m i c t h e o r y of p o l i t i c s , it m a y b e p r e d i c t e d , t h a t t h e r e is an i n h e r e n t t e n d e n c y for e x p a n s i o n of p u b l i c e x p e n d i t u r e s , the g r e a t e r t h e n u m b e r of s p e n d i n g a u t h o r i t i e s and q u a s i - a u t o n o m o u s l e v e l s o f g o v e r n m e n t is a n d the h i g h e r the s h a r e of e x p e n d i t u r e s a t a p a r t i c u l a r f e d e r a l l e v e l is w h i c h is n o t b e i n g f i n a n c e d f r o m r e v e ­ n u e s g e n e r a t e d at t h i s g o v e r n m e n t a l level, i.e., w h e r e f i s c a l e q u i v a l e n c e d o e s n o t p r e v a i l (Tarschys 1975).

D u e to t h e l a c k of a c o h e r e n t p o s i t i v e t h e o r y of the d e v e l o p ­ m e n t a n d s t r u c t u r e of p u b l i c e x p e n d i t u r e s , t h e a b o v e - m e n t i o n e d s e t of v a r i a b l e s c o u l d b e c o n s i d e r e d as an i n i t i a l step in the d i r e c t i o n of d e v e l o p i n g s u c h a t heory. T h e i n f l u e n c e and i m ­ p o r t a n c e of e a c h v a r i a b l e o n t h e d e v e l o p m e n t of t h e b u d g e t a r y s t r u c t u r e w i l l v a r y and, f u r t h e r m o r e , it m a y b e c o n c e p t u a l l y q u i t e d i f f i c u l t to i s o l a t e e a c h v a r i a b l e ' s i n f l u e n c e on t h e p u b l i c b u d g e t d u e to t h e h i g h d e g r e e of i n t e r d e p e n d e n c e .

T h e t i m e f a c t o r m a y a l s o b e d e c i s i v e in an e x t e n d e d a n a l y ­ sis. T h e c o n t r i b u t i o n of e a c h v a r i a b l e set to t h e e x p l a n a t i o n of s t r u c t u r a l c h a n g e s of the p u b l i c b u d g e t w i l l p r o b a b l y

v a r y w i t h the l e n g t h of t h e t i m e p e r i o d c hosen. In th i s c o n ­ text, it c o u l d be h y p o t h e s i z e d t h a t the s o c i o - e c o n o m i c v a r i ­ a b l e s m a y h a v e a m o r e s u b s t a n t i a l i n f l u e n c e in t h e l o n g - r u n d e t e r m i n a t i o n of s t r u c t u r a l c h a n g e s , w h i l e the p o l i t i c a l a n d i n s t i t u t i o n a l - a d m i n i s t r a t i v e v a r i a b l e s m a y p r i m a r i l y i n f l u e n c e

i n t e r m e d i a t e a n d s h ö r t - r u n v a r i a t i o n s .

O b v i o u s l y , n o t all t h e i s s u e s m e n t i o n e d a b o v e c a n be a n s ­ w e r e d in t h i s c o n t r i b u t i o n , b u t r a t h e r t h e y show in which way the

s u g g e s t e d a p p r o a c h m a y b e d e v e l o p e d further. The a r t i c l e w i l l f o c u s o n the e x p l a n a t o r y p a t t e r n of the s o c i o - e c o n o m i c , p o l i t ­ ical, a n d i n s t i t u t i o n a l - a d m i n i s t r a t i v e v a r i a b l e set s for the

m a i n e x p e n d i t u r e p r o g r a m m e s a n d for the v a r i o u s f e d e r a l d e ­ c i s i o n - m a k i n g levels. T h e f o l l o w i n g e x p l a n a t i o n s a n d e m p i r i ­ c a l r e s u l t s are t h e r e f o r e l i m i t e d to r e s u l t s c o n c e r n i n g t h e r e l a t i v e i m p o r t a n c e of t h e t h r e e v a r i a b l e s e t s w i t h

r e s p e c t to s t r u c t u r a l c h a n g e s , i.e., the q u e s t i o n is

p o s e d in t e r m s of r e l a t i v e w e i g h t s of " e c o n o m i c s m a t t e r s " ,

" p o l i t i c s m a t t e r s " , a n d / o r " i n s t i t u t i o n - a d m i n i s t r a t i o n m a t - , »I

ter, •

III. E m p i r i c a l A n a l y s i s of t h e D e t e r m i n a n t s o f B u d g e t a r y S t r u c t u r a l C h a n g e s for t h e P e r i o d , 1 9 6 4 - 1 9 7 8

1 . D a t a B a s e a n d M e t h o d o l o g i c a l P r o c e d u r e s

T h e e m p i r i c a l a n a l y s i s is b a s e d o n a d a t a s e t w h i c h w a s s p e c i a l l y c o m p i l e d f o r t h i s a n a l y s i s of s u b s t i t u t i o n e f f e c t s in t h e p u b l i c b u d g e t s o f t h e F e d e r a l R e p u b l i c of G e r m a n y

( i n clusive o f t h e a g g r e g a t e g o v e r n m e n t a l level, federal, lan d a n d m u n i c i p a l level) ( Z i m m e r m a n n / M ü l l e r 1985).

In s e c t i o n I of t h i s a r t i c l e , it w a s m e n t i o n e d t h a t t h e r e is n o t an a c c e p t e d c o h e r e n t p o s i t i v e t h e o r y o f c h a n g e s in the

b u d g e t a r y s t r u c t u r e . E v e n so, the i n c r e m e n t a l a p p r o a c h p r o ­ v i d e s an e x p l a n a t i o n o f t h e r e l a t i v e c o n s t a n c y of t h e b u d g e t a r y s t r u c t u r e . T h e c o n c e p t of " s u b s t i t u t i o n e f f e c t s " directly relates to it : It m e a s u r e s t h e d e v i a t i o n of an e x p e c t e d s i z e of a p a r ­

t i c u l a r e x p e n d i t u r e c a t e g o r y , b a s e d on its p r e v i o u s y e a r ' s s h a r e - a s s u m i n g a c o n s t a n t b u d g e t a r y s t r u c t u r e - f r o m the a c ­ t u a l v a l u e o f thi s e x p e n d i t u r e c a t e g o r y in a p a r t i c u l a r y e a r

( D a n ziger 1976). T h i s c o n c e p t w i l l b e u s e d e x c l u s i v e l y w i t h i n t h e e m p i r i c a l a n a l y s i s . T h e s u b s t i t u t i o n e f f e c t s e e m s to b e the a p p r o p r i a t e m e a s u r e of " w h e r e t h e a c t i o n is" (Rose/Page, p.7), b e c a u s e t h e d i f f e r e n c e b e t w e e n the a c t u a l l e v e l of a p a r t i c u l a r e x p e n d i t u r e c a t e g o r y a n d its e x p e c t e d level, a s ­ s u m i n g c o n s t a n c y o f t h e b u d g e t s t r u c t u r e , r e p r e s e n t s an indicator

of a d y n a m i c p r o c e s s of s t r u c t u r a l c h a n g e o v e r time, w h i c h c a n be e x p l a i n e d b y t h e set s of e c o n o m i c , p o l i t i c a l a n d / o r i n ­ s t i t u t i o n a l f a c t o r s . In c o n t r a s t to a s i m p l e c o m p a r i s o n of s h i f t i n g s h a r e s o v e r time, t h i s c o n c e p t h a s t h e a d v a n t a g e , a s s u m i n g t h a t the n o m i n a l e x p e n d i t u r e s are c o r r e c t l y d e f l a t e d ,

to p r o v i d e a d a t a b a s e w h i c h is s u i t a b l e for s u m m a r i z i n g and p r e s e n t i n g m e a s u r e s f o r s e l e c t e d t i m e p e r i o d s . P r o c e e d i n g in t h a t m a n n e r , e x c h a n g e p r o c e s s e s b e t w e e n d i f f e r e n t e x p e n d i t u r e g r o u p s as w e l l as r e c o v e r y o f e x p e n d i t u r e g r o u p s to t h e i r i n i t i a l p o s i t i o n o v e r t i m e c a n b e a n a l y z e d , w h e r e b y the r e ­ s u l t s w i l l n o t b e d o m i n a t e d b y t h e d a t a o f the m o r e r e c e n t t i m e p e r i o d s .

The d a t a of t h e s u b s t i t u t i o n e f f e c t s as a q u a n t i t a t i v e e x p r e s s i o n for s t r u c t u r a l c h a n g e s in p u b l i c b u d g e t s o v e r f i f t e e n y e a r s a n d for t h i r t e e n e x p e n d i t u r e c a t e g o r i e s w e r e f u r t h e r a n a l y z e d u s i n g m u l t i p l e c o r r e l a t i o n a n a l y s i s . F o r th i s p u r p o s e the a b o v e d i s c u s s e d 12 v a r i a b l e s w e r e d e s c r i b e d by 35 i n d i c a t o r s .

F o r 2 v a r i a b l e s (p o l i t i c a l v i s i b i l i t y , d e ­

g r e e of c o n t r o l l a b i l i t y f r o m the s e t of t h e p o l i t i c a l v a r i a b l e s ) it w a s n o t p o s s i b l e to c o m p u t e i n d i c a t o r s b a s e d o n a n n u a l data, so t h a t in t h e s e c a s e s t h e r e l a t i v e r a n k i n g of p a r t i c u l a r e x ­ p e n d i t u r e g r o u p s a c c o r d i n g to s e l e c t e d i n d i c a t o r s w e r e a u x i - l i a r i l y c o r r e l a t e d w i t h the a c c u m u l a t e d s u b s t i t u t i o n e f f e c t s o f e a c h e x p e n d i t u r e g r o u p a n d t h e i r i n d i v i d u a l r a n k i n g s (for d e t a i l s see: Z i m m e r m a n n / M ü l l e r 1985, pp. 217). Th i s e v a l u a ­ t i o n is, h o w e v e r , less r e l e v a n t a n d s i g n i f i c a n t t h a n t h e a n a ­ l y s i s b a s e d o n a n n u a l data, a n d t h u s t h e r e s u l t s g e n e r a t e d on t h i s l e v e l of a n a l y s i s a r e o n l y u s e d a d d i t i o n a l l y in sup-

p o r t of the m a i n a n a l y s i s . F r o m t h e a b o v e v a r i a b l e sets, t h e m a i n a n a l y s i s is t h e r e f o r e b a s e d on 10 v a r i a b l e s w h i c h a r e r e ­ p r e s e n t e d b y 31 i n d i c a t o r s . T h e s e 10 v a r i a b l e s c o m p r i s e m a i n ­ ly t h e s o c i o - e c o n o m i c v a r i a b l e s w h i c h n u m b e r 5, (national i n ­ come, i n t e r n a t i o n a l o p e n e s s , u n e m p l o y m e n t rate, e l a s t i c i t y of the p r o d u c t i o n se c t o r , a n d the age c o m p o s i t i o n o f the p o p u l a ­ tion) , 3 v a r i a b l e s of t h e i n s t i t u t i o n a l - a d m i n i s t r a t i v e set (size

of e x p e n d i t u r e , a d m i n i s t r a t i v e f l e x i b i l i t y , f i s c a l c e n t r a l i z a ­ tion) a n d o n l y 2 v a r i a b l e s o f the p o l i t i c a l v a r i a b l e set ( p oli­

t i c a l p r e f e r e n c e s , i n t e r e s t groups) d u e to the p r o b l e m of a d - 4

e q u a t e q u a n t i f i c a t i o n .

T h e f u r t h e r a n a l y s i s f o l l o w s in its m e t h o d o l o g i c a l and c o n ­ c e p t u a l p r o c e d u r e t h e " p o l i c y - o u t c o m e " - a p p r o a c h , w h i c h w a s d e ­ v e l o p e d b y T.R. D y e (1966). T h e e m p i r i c a l a n a l y s i s e m p l o y s a

t w o - s t e p m e t h o d of m u l t i p l e c o r r e l a t i o n a n a l y s i s :

(1) I n i t i a l l y , the d e t e r m i n a n t s , r e s p e c t i v e l y i n d i c a t o r s , of the t h r e e v a r i a b l e s sets a n d the s u b s t i t u t i o n e f f e c t s of e a c h e x p e n d i t u r e c a t e g o r y are r e l a t e d to e a c h o t h e r e m ­ p l o y i n g s t e p w i s e m u l t i p l e c o r r e l a t i o n a n a l y s i s ; (Table I.

C o l u m n s (1) - (3)).

(2) R e s p e c t i v e l y , t h e f i r s t two i n d i c a t o r s of the t h ree g r o u p s of s o c i o - e c o n o m i c , p o l i t i c a l a n d i n s t i t u t i o n a l - a d m i n i s t r a ­ t i v e v a r i a b l e s , w h i c h e m e r g e f r o m thi s p r o c e d u r e , are

a g a i n c o r r e l a t e d w i t h the s u b s t i t u t i o n e f f e c t s . The r e s u l t s r e p r e s e n t m u l t i p l e c o r r e l a t i o n c o e f f i c i e n t s for the w h o l e v a r i a b l e s e t (see T a b l e I C o l u m n 4).

A l t h o u g h t h e a n a l y s i s t a k e s i n t o a c c o u n t t h e f o u r g o v e r n m e n t a l l e v e l s - t h e a g g r e g a t e g o v e r n m e n t a l l e v e l ( F L M ) , f e d e r a l ( F ) , L a n d ( L ) , a n d m u n i c i p a l i t i e s (M) - , an e v a l u a t i o n of the r e ­ s u l t s f o r e a c h s p e c i f i c l e v e l is l a r g e l y o m i t t e d . Instead,

a c c o r d i n g t o t h e g o a l of the s t u d y t o e x p l a i n s u b s t i t u t i o n o r o c e s s e s f o r e x p e n d i t u r e gro u p s , a c o m p a r a t i v e e v a l u a t i o n ■ of the various- g o v e r n m e n t a l l e v e l s f o r the d i f f e r e n t e x p e n d i ­ t u r e g r o u p s w i l l be p r o v i d e d . In p r i n c i p l e , the sets o f i n d i ­ c a t o r s are b a s e d on l e v e l - s p e c i f i c data, a n d o n l y in the c a s e of the a g g r e g a t e g o v e r n m e n t a l l e v e l (FLM) i.e., d u e to the a g g r e g a t i o n , i n d i c a t o r s of d i f f e r e n t l e v e l s w i l l be e m p l o y e d t°o, m a i n l y f r o m the i n s t i t u t i o n a l - a d m i n i s t r a t i v e v a r i a b l e set.

2. D i s c u s s i o n a n d E v a l u a t i o n o f R e s u l t s

T a b l e I i n d i c a t e s t h a t t h e s e l e c t e d sets o f v a r i a b l e s a n d i n d i c a t o r s p o s s e s s an i m p r e s s i v e e x p l a n a t o r y power. If

o n e f o l l o w s D y e ' s a p p r o a c h w h i c h c o n s i d e r s as s i g n i f i c a n t a m u l t i p l e c o r r e l a t i o n c o e f f i c i e n t of 0.71 w i t h a v a r i a n c e e x ­ p l a n a t i o n o f m o r e t h a n 5 0 S , 48% o f t h e c o r r e l a t i o n coeffi^.

c i e n t s of o u r - r e s u l t s , i.e., for a l l fou r g o v e r n m e n t a l

l e v e l s a n d f o r t h e f o u r c o r r e l a t i o n sets, w o u l d s a t i s f y the s i g n i f i c a n c e c r i t e r i o n o f t h i s a p p r o a c h (Dye 1976, p. 284).

If o n e c o n s i d e r s the a g g r e g a t e v a r i a b l e s e t a n d its c o r r e l a ­ t i o n c o e f f i c i e n t s alone, t h e n a b o u t 94% w o u l d f u l f i l l the s i g n i f i c a n c e l e v e l w h i c h Dye h a s s e l e c t e d for his study.

F o c u s s i n g i n i t i a l l y on the e x p l a n a t o r y p o w e r of the

a g g r e g a t e v a r i a b l e set, it b e c o m e s c l e a r t h a t o n l y very rarely the

Governmental L e ve ls

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1 ,5 ,1 0 = R s i g n i f i c a n t a t 1 ,5 and 10% le v e l, ns = R i n s i g n i f i c a n t even a t 10% le v e l.

c o r r e l a t i o n c o e f f i c i e n t s o f the v a r i o u s e x p e n d i t u r e g r o u p s d i d n o t s a t i s f y D y e ' s c r i t e r i o n (in case of " p u b l i c

s a f e t y " e x p e n d i t u r e s at the a g g r e g a t e g o v e r n m e n t a l level,

" p u b l i c f i n a n c e m a n a g e m e n t " at the f e d e r a l level,

a n d " t r a n s p o r t a t i o n " at t h e L a e n d e r level. T h e d e g r e e of e x ­ p l a n a t i o n of t h e s u b s t i t u t i o n e f f e c t s (i.e., a b s o l u t e s t r u c ­ t u r a l g a i n s a n d losses) for t h e d i f f e r e n t e x p e n d i t u r e g r o u p s u s i n g t h e a g g r e g a t e v a r i a b l e - s e t , v a r i e s s u b s t a n t i a l l y a m o n g t h e v a r i o u s g o v e r n m e n t a l levels, w h i c h is to be e x p e c t e d due to t h e d i f f e r e n t e c o n o m i c , p o l i t i c a l a n d i n s t i t u t i o n a l c o n ­ d i t i o n s p r e v a i l i n g at e a c h g o v e r n m e n t a l level.

A m o r e d i f f e r e n t i a t e d p i c t u r e e m e r g e s w h e n t h e i n d i v i d u a l v a r i a b l e set s a r e a n a l y z e d .

T h e d e g r e e of e x p l a n a t i o n b y the s o c i o - e c o n o m i c v a r i a b l e s e t , a c c o r d i n g to D y e 1s c r i t e r i o n a n d in c o m p a r i s o n of t h e v a ­ r i a b l e set s a m o n g e a c h o t h e r , is r e l a t i v e l y strong. In

sum, m o r e t h a n 24% o f t h e c o r r e l a t i o n c o e f f i c i e n t s s h o w h i g h e r v a l u e s th a n D y e ' s 0.71 c r i t e r i o n . If the v a ­

r i o u s e x p e n d i t u r e c o m p o n e n t s a r e s e p a r a t e d a c c o r d i n g to d i f f e ­ r e n t g o v e r n m e n t a l levels, t h e n the f o l l o w i n g p i c t u r e e m e r g e s : e x p e n d i t u r e s for t r a n s p o r t a t i o n a r e s t r o n g l y i n f l u e n c e d o n the a g g r e g a t e g o v e r n m e n t a l level, f e d e r a l a n d m u n i c i p a l level; e x ­ p e n d i t u r e s for u n i v e r s i t i e s o n t h e a g g r e g a t e g o v e r n m e n t a l a n d f e d e r a l level; e x p e n d i t u r e s for p u b l i c s a f e t y o n t h e f e d e r a l a n d m u n i c i p a l level; e x p e n d i t u r e s for e c o n o m i c d e v e l o p m e n t o n t h e s t a t e a n d m u n i c i p a l level; e x p e n d i t u r e s for m e d i c a r e on t h e a g g r e g a t e g o v e r n m e n t a l l e v e l and, finally, e x p e n d i t u r e s f o r p r i m a r y a n d s e c o n d a r y e d u c a t i o n on the f e d e r a l l e v e l .

T h e p o l i t i c a l v a r i a b l e s e t is a p p a r e n t l y t h e l e a s t i m p o r t a n t of the t h r e e v a r i a b l e sets. O n l y 12% of the c o r r e l a t i o n c o e f f i c i e n t s e x c e e d D y e ' s c r i t e r i o n of R = 0.71.

A t t h e f e d e r a l level, f o r e x a m p l e , n o t e v e n o n e of the c o r r e ­ l a t i o n c o e f f i c i e n t s e x c e e d s the c r i t e r i o n chosen.

B y c o n t r a s t , the i n s t i t u t i o n a l - a d m i n i s t r a t i v e v a r i a b l e s e t is of m a j o r i m p o r t a n c e , n a m e l y 62% of the c o r r e l a t i o n c o ­ e f f i c i e n t s s a t i s f y D y e ' s c r i t e r i o n . In p a r t i c u l a r ,

t h e c a t e g o r i e s of e c o n o m i c d e v e l o p m e n t a n d p u b l i c e n t e r p r i s e s h a v e s i g n i f i c a n t c o r r e l a t i o n c o e f f i c i e n t s at a l l g o v e r n m e n t a l levels; e x p e n d i t u r e s for s o c i a l s e c u r i t y a n d p u b l i c h o u s i n g a t all g o v e r n m e n t a l lev e l s , e x c e p t at the m u n i c i p a l level; e x ­ p e n d i t u r e s for e n v i r o n m e n t a l p r o t e c t i o n at all levels, e x c e p t the L a e n d e r ; e x p e n d i t u r e s f o r t r a n s p o r t a t i o n a n d for p u b l i c f i ­ n a n c e m a n a g e m e n t at t h e a g g r e g a t e g o v e r n m e n t a l a n d m u n i c i p a l level; d e f e n s e e x p e n d i t u r e s a t t h e a g g r e g a t e g o v e r n m e n t a l a n d f e d e r a l level; e x p e n d i t u r e s f o r u n i v e r s i t i e s at t h e a g g r e g a t e g o v e r n m e n t a l a n d lan d level; e x p e n d i t u r e s f o r p u b l i c s c h o o l s a n d p u b l i c s a f e t y f u l f i l l D y e ' s c r i t e r i o n o n l y at

t h e m u n i c i p a l level, a n d t h e e x p e n d i t u r e s for p u b l i c h e a l t h o n l y a t the L a e n d e r level.

If t h e s e c o r r e l a t i o n c o e f f i c i e n t s a r e a r r a n g e d l e v e l - s p e - c i f i c a l l y a n d d i s t i n g u i s h e d a c c o r d i n g to s t r o n g / w e a k r e l a t i o n ­

ship, t h e n 6 s e q u e n c e s o f v a r i a b l e sets, .according to t h e i r r e s p e c t i v e c o r r e l a t i o n c o e f f i c i e n t s , emerge. (R e c = c o r r e l a t i o n c o e f f i c i e n t of the s o c i o - e c o n o m i c ; R ,

pol c o r r e l a t i o n c o e f f i

c i e n t of t h e p o l i t i c a l , a n d R. = c o r r e l a t i o n c o e f f i c i e n t of the i n s t i t u t i o n a l - a d m i n i s t r a t i v e v a r i a b l e s e t ) . N o w r e s u l t s c a n be d e r i v e d c o n c e r n i n g t h e q u e s t i o n w h i c h o n e o f the v a r i ­ a b l e sets is d o m i n a t i n g the s u b s t i t u t i o n e f f e c t s and, thus, is m a i n l y c a u s i n g s t r u c t u r a l c h a n g e s in p u b l i c b u d g e t s .

T a b l e II F r e q u e n c y of S e q u e n c e s of the V a r i a b l e Sets ( C o r r e l a t i v e C o e f f i c i e n t s ) A c c o r d i n g to

G o v e r n m e n t a l L e v e l s

- A b s o l u t e a n d (% o f E x p e n d i t u r e G roups)

(1 ) Rec>Rpol>Rinst

(2 ) Rec> R in s t> Rpol

(3 )

Rpol> R e o R in s t Rpol (4 )

> R in s t? Rec

(5 ) R in s t? Rpol Rec

(6 )

R in s t> Rec?Rpol

£

LA? 2 (1 5 ) 1 (8 ) 0 (0 ) 0 (0 ) (1 5 ) 8 (6 2 ) 13 (100)

F 1 (8 ) 3 (2 3 ) 0 (0 ) 0 (0 ) 2 (1 5 ) 7 (5 4 ) 13 (100)

L 1 (8 ) 0 (0 ) 2 (1 7 ) 0 (0 ) 2 (1 7 ) 7 (5 8 ) 12 (100)

M 1 (8 ) 2 (1 7 ) 1 (8 ) 1 (8 ) 4 (3 4 ) 3 (2 5 ) 12 (100)

r

A l t o g e t h e r , t h e s e q u e n c e of the m u l t i p l e c o r r e l a t i o n c o ­ e f f i c i e n t s in o r d e r o f R. , > R > R , (Column 6) d o m i n a t e s

m s t ' ec ✓ pol

the e x p l a n a t i o n of t h e s u b s t i t u t i o n e f f e c t s in a b o u t 50% of the c a s e s (i.e., 50 c a s e s a r e c o m p o s e d of 2 g o v e r n m e n t a l le­

v e l s w i t h 13 e x p e n d i t u r e gr o u p s , a n d 2 g o v e r n m e n t a l levels 5

w i t h 12 e x p e n d i t u r e g r o u p s ). If a l s o the s e c o n d g r o u p

of c o r r e l a t i o n c o e f f i c i e n t s w h e r e the i n s t i t u t i o n a l v a r i ­ a b l e set is l e a d i n g w i l l b e a d d e d w h i c h i n c l u d e s 20% of the c a s e s (Column 5), t h e n 70% of t h e c a s e s are; explained best by the c o r r e l a t i o n c o e f f i c i e n t s of t h e i n s t i t u t i o n a l - a d m i n i s t r a t i v e v a r i a b l e set.

If the s o c i o - e c o n o m i c v a r i a b l e set r a n k s f i r s t in the t h r e e v a r i a b l e s e t s t h e n 22% o f t h e c a s e s c a n b e i d e n t i f i e d

as b e l o n g i n g to th i s g r o u p w h e r e b y t h e s u b s e t Rp o l aP~

p e a r s in 12% a n d the s u b s e t R , > R. in 10% of t h e c a ses p o l ^ m s t

(Column 1 a n d 2) .

T h e p o l i t i c a l v a r i a b l e set (Column 3 a n d 4) o b v i o u s l y d o e s n o t s e e m to be v e r y d o m i n a n t (only 8%..of the cases) a n d t h e n o r i n a r i l y s p e c i f i e d in the s u b s e t R > R . (6%).

J e c z m s t

Some level-specific differences of the variable sets a r e o b s e r v ­ able, too: f o r e x a m p l e , t h e c o n s t e l l a t i o n of the v a r i a b l e set

^ i n s t ^ ^ec'* ^ p o l as c -'-e a r lY o v e r r e p r e s e n t e d at the a g g r e g a t e g o v e r n m e n t a l a n d L a e n d e r l e v e l , b u t u n d e r r e p r e s e n t e d at t h e m u n i c i p a l level, w h i l e the s u b s e t R p O p ^ R ec a p p a r e n t l y d o m i n ­ a t e s at the m u n i c i p a l level.

For the oolitically dominated sequence of variable sets, a relatively s t r o n g e r r e p r e s e n t a t i o n is n o t i c e a b l e at t h e m u n i c i p a l level

(subset

R ac ) and at the

With the socio-economic variable set ranking first, there are also vary ing d e g r e e s o f o v e r r e p r e s e n t a t i o n n o t i c e a b l e at t h e a g g r e g a t e g o v e r n m e n t a l l e v e l (subset Rp O j_^ R ) a n d at t h e f e d e r a l

l e v e l (subset R. , ■> R , ).

i n s t Z pol

F r o m the a b o v e r e s u l t s , no c l e a r t o t a l p i c t u r e e m e r g e s a n d t h e l e v e l - s p e c i f i c d i f f e r e n c e s a r e n o t c l e a r - c u t . N e v e r ­ t h e l e s s , the g e n e r a l d o m i n a n c e of t h e i n s t i t u t i o n a l v a r i a b l e s e t c a n be c o n f i r m e d , h o w e v e r , it is less c l e a r l y p r o n o u n c e d at t h e m u n i c i p a l level. T h e s o c i o - e c o n o m i c v a r i a b l e set is to a l e s s e r d e g r e e d o m i n a n t . It is m o r e e f f e c t i v e at the f e d e r a l a n d to a l e s s e r d e g r e e at the a g g r e g a t e g o v e r n m e n t a l and Laender levels, a n d r e l a t i v e l y w e a k at the m u n i c i p a l level. S u b s t a n ­ t i a l d i f f e r e n c e s a r i s e o n l y in the l e v e l - s p e c i f i c i m p o r t a n c e of the p o l i t i c a l v a r i a b l e set: E v e n if o n e c o n c e d e s tha t the p o l i t i c a l v a r i a b l e set is of l e s s e r i m p o r t a n c e , n e v e r t h e l e s s t h e s e f a c t o r s a r e o b s e r v a b l e in p a r t i c u l a r at the m u n i c i p a l level, a n d w e a k e r at t h e s u c c e s s i v e l y h i g h e r g o v e r n m e n t a l l e ­ vels. A c c o r d i n g to o u r a n a l y s i s , it s e e m s t h a t the m u n i c i p a l l e v e l - if a n y - m a y b e c o n s i d e r e d as the l e v e l at w h i c h p o l i ­ t i c a l v a r i a b l e s a r e m o r e p r o n o u n c e d , w h i l e e c o n o m i c v a r i a b l e s b e c o m e m o r e a p p a r e n t at the f e d e r a l level. T h e l a t e r o b s e r v a ­ tion, h o w e v e r , is n o t s u r p r i s i n g s i n c e t h e f e d e r a l g o v e r n m e n t is m a i n l y r e s p o n s i b l e for m a c r o - e c o n o m i c s t a b i l i z a t i o n p o l i ­ c i e s .

T h e a b o v e r e s u l t s a r e i l l u m i n a t e d m o r e in de t a i l , if in a d d i t i o n the e x p e n d i t u r e g r o u p s a n d t h e i r r e s p e c t i v e l o n g - r u n t r e n d s o f t h e s u b s t i t u t i o n e f f e c t s (i.e. a c c u m u l a t e d s u b ­ s t i t u t i o n e f f e c t s for the p e r i o d 1 9 6 4-1978) a r e c o m p a r e d w i t h t h e r e s u l t s o f t h e c o r r e l a t i o n a n a l y s i s (data a n d c a l c u l a t i o n s n o t r e c o r d e d h e r e ) .

O n t h e a g g r e g a t e g o v e r n m e n t a l a n d f e d e r a l levels, t h e s o ­ c i o - e c o n o m i c v a r i a b l e s a r e m a i n l y r e s p o n s i b l e for s u b s t i t u t i o n gains, w h e r e a s t h e p o l i t i c a l a n d a l s o the i n s t i t u t i o n a l v a r i ­ a b l e s e x p l a i n to a l a r g e e x t e n t the s u b s t i t u t i o n losses. T h e c o n t r a r y t a k e s p l a c e o n t h e Laender level, h e r e the i n s t i t u t i o ­ n a l v a r i a b l e s h a v e t h e s t r o n g e s t i n f l u e n c e o n the e x p e n d i t u r e s gro u p s , w h i c h g a i n e d d u r i n g t h e s u b s t i t u t i o n p r o c e s s , w h i l e the s o c i o - e c o n o m i c v a r i a b l e s w e r e d o m i n a n t f o r the e x p e n d i t u r e s g roups, w h i c h h a v e l o s t s h a r e s d u r i n g the s u b s t i t u t i o n p r o c e s s . A t the m u n i c i p a l level, t h e s o c i o - e c o n o m i c v a r i a b l e s p l a y a d e ­ c i s i v e r o l e in e x p l a i n i n g s u b s t i t u t i o n gains, b u t als o s u b s t i -

s t u t i o n losses.. In sum, the

c o n c l u s i o n s of D a v i s / D e m p s t e r / W i l d a v s k y (1974, p. 451) c a n n o t be c o n f i r m e d for t h e G e r m a n s i t u a t i o n i.e., t h a t the s o c i o - e c o ­ n o m i c f a c t o r s in c o n t r a s t to p o l i t i c a l f a c t o r s are e x e r c i s i n g a n e g a t i v e i n f l u e n c e o n t h e e x p e n d i t u r e s g r o u p s . Instead, t h e G e r ­ m a n s i t u a t i o n a p p e a r s r a t h e r b a l a n c e d .

T h e t h r e e v a r i a b l e sets a r e c l e a r l y n o t l e v e l - s p e c i f i c a l l y i n ­ d i f f e r e n t w i t h r e s p e c t to t h e i r i m p a c t o n t h e s u b s t i t u t i o n e f ­ fects. It is here, n e v e r t h e l e s s , a t t e m p t e d to c a t e g o r i z e the e x p e n d i t u r e gro u p s , r e g a r d l e s s of t h e i r g o v e r n m e n t a l level,

a c c o r d i n g t o t h e i m p a c t of the d o m i n a t i n g s i n g l e v a r i a b l e s .

H ereby, t h e a g g r e g a t e g o v e r n m e n t a l l e v e l is i g n o r e d , s i n c e it c a n ­ n o t b e c o n s i d e r e d as in i n d e p e n d e n t a u t h o r i t y in the d e c i s i o n m a k i n g p r o c e s s . O n l y .the e x p e n d i t u r e c a t e g o r y d e f e n s e is almost ex­

c l u s i v e l y d o m i n a t e d b y i n s t i t u t i o n a l factors; p r e d o m i n a n t l y i n ­ s t i t u t i o n a l l y i n f l u e n c e d - at l e a s t at t w o g o v e r n m e n t a l l e v e l s - are s e v e r a l e x p e n d i t u r e s gro u p s , for e x a m p l e , t h e e x p e n d i t u r e s for e c o n o m i c d e v e l o p m e n t , p u b l i c f i n a n c e m a n a g e m e n t , u n i v e r s i t i e s ,

m e d i c a r e , e n v i r o n m e n t a l p r o t e c t i o n a n d p u b l i c e n t e r p r i s e s . T h e r e ­ fore, a p p r o x i m a t e l y 54% of t h e e x p e n d i t u r e c a t e g o r i e s are m a i n l y i n f l u e n c e d b y i n s t i t u t i o n a l f a c t o r s . N o e x p e n d i t u r e g r o u p c a n be i d e n t i f i e d as e x c l u s i v e l y or a l m o s t e x c l u s i v e l y p o l i t i c a l l y d o m i n a t e d .

T h e e x p e n d i t u r e g r o u p s of p u b l i c safety, p u b l i c s c h o o l s y s ­ t e m a n d m i s c e l l a n e o u s are i n f l u e n c e d p r e d o m i n a n t l y b y s o c i o - e c o ­ n o m i c f a c t o r s , w h i l e s o c i a l w e l f a r e and t r a n s p o r t a t i o n a r e d e ­ t e r m i n e d e x c l u s i v e l y b y t h e s e f a c t o r s . In sum, a p p r o x i m a t e l y 38%

of t h e e x p e n d i t u r e s g r o u p s a r e m a i n l y i n f l u e n c e d b y socio-econctnic variables. If these r e s u l t s are f u r t h e r c o m p a r e d w i t h t h e r e s u l t s of

the l o n g - r u n s u b s t i t u t i o n p r o c e s s e s , t h e n the D a v i s / D e m p s t e r / W i l - d a v s k y ' s s c e p t i c i s m c o n c e r n i n g t h e i m p o r t a n c e of t h e s o c i o - e c o n o ­ m i c f a c t o r s c a n n o t be s u p p o r t e d . T h e e x p e n d i t u r e c a t e g o r i e s w i t h t h e h i g h e s t s u b s t i t u t i o n g a i n s (e.g., s o c i a l w e l f a r e , p u b l i c e d u ­ cation) are c o m p l e t e l y or a l m o s t c o m p l e t e l y i n f l u e n c e d by s o c i o ­ e c o n o m i c v a r i a b l e s , w h i l e t h e e x p e n d i t u r e g r o u p s w i t h the h i g h e s t s u b s t i t u t i o n l o s s e s (e.g., d e f e n s e , e c o n o m i c d e v e l o p m e n t ) are

m a i n l y i n f l u e n c e d b y i n s t i t u t i o n a l factors. It d o e s n o t a p p e a r t o b e p l a u s i b l e t h a t i n s t i t u t i o n a l d e p e n d e n c e w i l l n e c e s s a r i l y l e a d to s u b s t i t u t i o n g a i n s or at l e a s t s t r u c t u r a l s t a b i l i t y , b u t r a t h e r i n c r e m e n t a l b u d g e t i n g m a y i n s t e a d c a u s e s u b s t a n t i a l s t r u c t u r a l l o s s e s - a l o n g - r u n a s p e c t w h i c h the i n c r e m e n t a l i s t s , d u e to t h e i r f i x a t i o n on t h e s h o r t p e r i o d h a v e f r e q u e n t l y igno r e d . O n t h e o t h e r h a n d , o n e m a y a g r e e w i t h D a v i s / D e m p s t e r / W i l d a v s k y 1s c o n c l u s i o n

(1974, p. 451) t h a t s o c i o - e c o n o m i c v a r i a b l e s h a v e a p a r t i c u l a r l y i m p o r t a n t i m p a c t on " n o n - c o n t r o v e r s i a l - a c t i v i t i e s " . In th i s study, s u c h " n o n - c o n t r o v e r s i a l a c t i v i t i e s " i n c l u d e s o c i a l w e l f a r e a n d p u b l i c e d u c a t i o n , as w e l l as t h e c a t e g o r i e s " m i s c e l l a n e o u s "

(including a d m i n i s t r a t i o n , f i n e arts, cult u r e , f o r e i g n a f f a i r s , f o r e i g n aid) a n d p u b l i c s afety, w h i c h o b t a i n e d the l a r g e s t s u b ­ s t i t u t i o n g ains. T h e e x p e n d i t u r e s for t r a n s p o r t a t i o n , w h i c h on a l l g o v e r n m e n t a l l e v e l s w e r e p r i m a r i l y e x p l a i n e d b y s o c i o - e c o ­ n o m i c v a r i a b l e s , a p p a r e n t l y d i d n o t b e l o n g to the " n o n - c o n t r o - v e r s i a l " - c a t e g o r y . H e r e a n d in t h e ca s e of p u b l i c h o u s i n g , the D a v i s / D e m p s t e r / W i l d a v s k y 1s h y p o t h e s i s m a y b e c o r r e c t , n a m e l y tha t n o n - i n s t i t u t i o n a l f a c t o r s m a i n l y a f f e c t t h e " v u l n e r a b l e " e x p e n d i ­ t u r e gro u p s . E x p e n d i t u r e s m a y b e v i e w e d v u l n e r a b l e , if t h e y o f ­ f e r " r o u t i n e - s e r v i c e s " , for e x a m p l e p u b l i c h o u s i n g o r if t h e y a r e o b j e c t of p u b l i c d i s p u t e ( t r a n s p o r t a t i o n , esp. h i g h w a y s ) .

T h e e x p e n d i t u r e g r o u p s w i t h m o d e r a t e s u b s t i t u t i o n gains,

s u c h as p u b l i c f i n a n c e m a n a g e m e n t , u n i v e r s i t i e s , m e d i c a r e , e n v i r o n ­ m e n t a l p r o t e c t i o n a n d p u b l i c e c o n o m i c e n t e r p r i s e s , i l l u s t r a t e t h a t p r e d o m i n a n t l y i n s t i t u t i o n a l d e t e r m i n a t i o n and, t h e r e f o r e , i n c r e ­ m e n t a l b u d g e t i n g b e h a v i o r w i l l be r e f l e c t e d in m o d e r a t e e x p a n s i o n of c e r t a i n e x p e n d i t u r e c a t e g o r i e s . Th i s is the n o r m a l s i t u a t i o n as t h e p r o p o n e n t s o f i n c r e m e n t a l i s m w o u l d t y p i c a l l y p r e d i c t .

IV. C o n c l u d i n g R e m a r k s

T h e a b o v e r e s u l t s a r e s o m e w h a t s u r p r i s i n g , at l e a s t for t h o s e w h o a s s u m e d t h a t p o l i t i c a l v a r i a b l e s w o u l d h a v e a s u b s t a n t i a l i m p a c t o n t h e d e t e r m i n a t i o n of t h e s u b s t i t u t i o n e f f e c t s - a n d this in p a r t i c u l a r d u r i n g a p e r i o d w h e n a c e n t r e - l e f t c o a l i t i o n w a s g o v e r n i n g t h e F e d e r a l R e p u b l i c of G e r m a n y and, thus, g a v e r i s e to t h e e x p e c t a t i o n s of m a j o r " r e f o r m s " or e v e n " r e v o l u t i o n a r y "

c h a n g e s in p o l i c y d i r e c t i o n s . T h e s e e x p e c t a t i o n s , h o w e v e r , tur n o u t to b e n o t h i n g m o r e t h a n a s p e c i a l k i n d of " f i s c a l i l l u s i o n " , since during this time period, merely 1% of the accumulated aggregate budgfets '