Determinants of State Intervention: Evidence for the EU

Abstract

The purpose of the paper is to analyze the determinants of State intervention upon the social and economic life, and to grasp their implications in terms of public policy. The problem of State interventionism is a current one, and over time it has been under the influence of certain factors such as interstate differences, economic and social crises, political governance of the country, regional policy and globalization. The challenges that the current economic crisis brings in terms of State interventionism, are also presented. Some indicators that quantify the extent of State intervention through public expenditures are analyzed for the EU member countries (1995- 2010) in order to capture the general trends in their evolution and the peculiarities of their structure. The empirical analysis, based on a panel econometric model, aims to establish the relevance held by the main determinants for the degree of State intervention in budgetary expenditure, for the EU countries. The possibilities for an increasing State interference during the crisis, related with the withdrawal of the State once the crisis would be overcome, are valued with reference to the significant determinants of the interference policy derived from empirical analysis.