Determinants of the Growth of Government Expenditure in Thailand, 1960-1979

Abstract

This study has attempted to identify the determinants of the growth of government expenditure in Thailand, both at aggregated and disaggregated levels for the period 1960-1979. In doing so, following Wagner's law (1883) of "expanding scale of state activity" the central working hypothesis examined in this study was that the share of government expenditure in GNP rises with the level of economic development. It was found that, in general, the share of total government expenditure rose with the rise in the level of per capita income. However, a deeper look suggested that the rate of increase in the share of government expenditure (total) in GNP with respect to the level of per capita GNP is falling and that led to the argument that there may be a critical limit beyond which the share may cease to rise or may even fall. The comparative study of the growth pattern of government expenditure and revenue suggested the likelihood of bridging the existing and widening gap between the level of expenditure and revenue in the years to come. From this it appeared that there would not be a serious revenue constraint for the further expansion of the Thai Government sector for many years to come.