Technology and the Size of the Public Sector

Since its creation the European Union continually expands its territory and its activities. The creation of a federal unit functioning on top of national governments tends to increase the size of the public sector, thus bringing to the fore discussions on the optimal size of the public sector. It also raises the question of the division of responsibilities among entities in the public sector. In this paper we set out to study the factors affecting the optimal size of the public sector and the division of responsibilities among entities functioning within it. The focus of the paper is mainly on the effect of technological progress on the optimal size of the public sector. We argue that past and current trends in technology favour its increase.