ABSTRACT
The size of the state and the methods of fulfilling its main functions (see for example Musgrave, 1959) have changed significantly in recent decades. After the World War II the role of the state expanded rapidly and public expenditure grew faster than GDP (Stiglitz, 1988). For example in Sweden in the early 1980s government expenditure reached almost 70 percent of GDP. The state delivered most of its activities via public sector bodies and public expenditure. But both countries and experts came to realize that such trends were unsustainable and started “reinventing government” (Osborne and Gaebler, 1993). “New Public Management” (NPM) (Coombes and Verjheijen, 1997) “replaced” the concept of the classical state in the last two decades of the twentieth century. However, after evaluations of the impact and outcomes of NPM it became clear that the use of market forces in the public sector also had noticeable limitations (Pollit and Bouckaert, 2004).
