Government Spending

Public spending enables governments to produce and purchase goods and services in order to fulfill their objectives — such as the provision of public goods or the redistribution of resources. On this topic page, we study government spending through the lens of aggregate cross-country data on government expenditures. For readability, we use the term “spending” rather than the more technical “expenditure” to refer to all government-financed activities.

We begin with an analysis of historical trends and then move on to analyze recent developments in public spending patterns around the world.

The available long-run data shows that the role and size of governments around the world have changed drastically in the last couple of centuries. In early-industrialized countries, specifically, the historical data shows that public spending increased remarkably in the 20th century , as governments started spending more resources on social protection, education, and healthcare.

Recent data on public spending reveals substantial differences across countries. Relative to low-income countries, government spending in high-income countries tends to be much larger (both in per capita terms and as a share of GDP), and it also tends to be more focused on social spending .

Recent data on public spending also shows that governments around the world often rely on the private sector to produce and manage goods and services . Public-private partnerships, in particular, have become a popular mechanism for governments to finance, design, build, and operate infrastructure projects. In the period 2005–2010 alone, the total value of these projects in low and middle-income countries more than doubled .

The visualization shows the evolution of government spending as a share of Gross Domestic Product (GDP) , for a selection of countries over the last century.

If we focus on early-industrialized countries, we can see that there are four broad periods in this chart. In the first period, until the First World War, spending was generally low. These low levels of public spending were just enough for governments to be concerned with basic functions, such as maintaining order and enforcing property rights.

In the second period, between 1915 and 1945, public spending was generally volatile, particularly for countries that were more heavily involved in the First and Second World Wars. Government spending as a share of national output went sharply up and down in these countries, mainly because of changes in defense spending and national incomes.

In the third period, between 1945 and 1980, public spending grew particularly fast. As we show in more detail later, this was the result of growth in social spending , which was largely made possible by historical increases in government revenues over the same period .

Since 1980, the growth of government spending has been slowing down in early-industrialized countries — and in some cases, it has gone down in relative terms. However, in spite of differences in levels, in all these countries public spending as a share of GDP is higher today than before the Second World War.

Although the increase in public spending has not been equal in all countries, it is still remarkable that growth has been a general phenomenon despite large underlying institutional differences.

At the end of the 19th century, governments in European countries spent around 10% of their GDP. In the 21st century, this figure is closer to 50% in many European countries. The increase in absolute terms — rather than the shown relative terms — is much larger since the level of GDP per capita increased substantially over this period.

These figures from the International Monetary Fund (IMF) refer to “general government” spending, when available. This includes all levels of government: central, state or regional, and local. In countries where such data is unavailable, the figures only cover the central government .

The chart above shows that government spending in early-industrialized countries grew substantially in the 20th century. The next visualization shows that this was the result of growth, specifically in social spending.

The steep growth of social spending in the second half of the 20th century was largely driven by the expansion of public funding for healthcare and education .

The map shows recent estimates of total government spending across the world, measured as a share of GDP. The data comes from the International Monetary Fund (IMF) and refers to the general government , when available.