Public Finance Variations: A New Approach*

Few themes have aroused so much interest and contention as the search for environmental determinants of public policy. One major problem area in this debate concerns the identification of explanatory variables accounting for the cross-country variation in public expenditures. As no agreement has been reached about the basic issues involved, it seems appropriate to formulate a new approach to the problem of accounting for public finance patterns. An argument is presented to the effect that the employment of more rigorous econometric tools may help us draw an outline of the structural pattern behind the public household. The analysis indicates that we must abandon the idea of identifying stable structures that describe the relationships between the public household and the environment.