The growth of public expenditure in Korea, 1953-1991

As in most other developed countries, the growth of the public sector has become an important issue in the economic and political debate of Korea in recent years. In 1953 the public sector was relatively small compared to other developed countries, but since the end of the Korean War, the public sector has grown dramatically. Over the last four decades, governments have exerted an enormous influence on the level and allocation of scarce resources in the economy. Especially, since the early 1960s, government involvement in the economy has increased rapidly to promote export and economic growth.;Although the public sector has played an important role during the Korean modernisation process and public expenditure has grown rapidly, few studies have been carried out to explain the sustained growth of public expenditure in Korea. These thesis seeks to explain the nature and causes of the growth of government expenditure in Korea for the period of 1953-1991.;This thesis reviews nine alternative theories of government growth which attempt to explain the observed phenomenon of the rising trend in public expenditure. After reviewing theories of public expenditure growth, we analyse the applicability of these leading hypotheses on public expenditure behaviour with data taken from Korea during the period 1953-1991.;Our empirical study shows that Wagner's hypothesis of expanding state activity is more reliable than Peacock and Wiseman's displacement effect hypothesis in explaining the Korean case. Moreover, our empirical research indicates that the income effect, the relative price effect and the lagged dependent variable are the main causes of the expansion of government expenditure in Korea over the study period.