CHAPTER 7
Figure 7.1: Government size in G7 countries, 1960, 1990, 2000, and 2010
Figure 7.2: Government size, 1995, 2007, and 2010
(government spending, percentage of GDP)
(median government spending, percentage of GDP)
Note: “EU cand.” refers to EU candidate countries and “E. prtn.” refers to EU eastern partnership countries. Source: World Bank staff calculations, based on Eurostat; IMF WEO; and OECD National Accounts Statistics.
Figure 7.3: Density of government size in Europe
Figure 7.4: Government size in 1995 and 2010
Source: World Bank staff calculations, based on Eurostat; IMF WEO; and OECD National Accounts Statistics.
The impact of the crisis on government spending is visible in figure 7.3, which shows a kernel density plot of government spending in Europe for 1995, 2007, and 2010. In 1995–2007, the density became more concentrated, as the variation in government size declined. In 2007–10, the distribution shifted to the right, indicating higher spending induced by the crisis across Europe. Seven European countries spent more than 52 percent of GDP in 2010, versus only one in 2007. Government spending increased during the crisis relative to output mainly for two reasons: governments stepped up social spending to mitigate the social impact of the crisis and stabilize the economy; and the collapse in output meant that government size rose, even with no change in public expenditures. Still, there is a fair amount of persistence in government size across countries (figure 7.4).
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