Research Paper No. 750

THE DISPLACEMENT HYPOTHESIS AND GOVERNMENT SPENDING IN THE UNITED KINGDOM: SOME NEW LONG-RUN EVIDENCE

by

OLAN HENRY & NILSS OLEKALNS

JUNE 2000

Department of Economics. University of Melbourne. Melbourne Victoria 3010 Australia

 

ABSTRACT

This paper presents new evidence on the ability of Peacock and Wiseman's displacement hypothesis to explain temporal increases in the ratio of government expenditure to GDP in the United Kingdom. Using univariate modelling techniques that are robust to structural changes in the underlying data generating process and a data set extending back to 1836, we find four instances where displacement may be said to have occurred.

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