Cross-country differences in government sector activities

The purpose of the analysis presented in the article is to identify various economic, social, political, demographic and cultural factors that could shape the differences in the size of government sector across countries and, with the use of econometric analysis empirically verify the effect of those factors. The analysis focuses only on ”budgetary” government, meaning that the size of government is measured with a certain government spending ratio. The results of the analysis revealed that economic factors are more important in explaining the variation in the size of government consumption spending, whereas political, social and cultural factors are more important in explaining the variation in the size of transfer spending. In addition, the results indicate that the relative size of government spending is inversely related to the extent of the regulation of the economy.