Includes bibliographical references

This paper examines the growth of government expenditures and revenues in Iran over the last two decades in light of conventional theories as to the nature of public sector economic activity. The role of the state as an agent of modernization and development is emphasized. We assess the validity of Wagner's law in relation to the Iranian experience. Simple forms of government expenditure and tax functions are estimated. Tests of structural change are performed in order to examine the stability of parameters in the two decades preceding and following the Islamic Revolution of 1979. We also examine the speed of the adjustment process by estimating a simple disequilibrium model of government expenditures and receipts. The pattern of government expenditures and the revenues structure are also examined. Using a constant shares model as well as a constant marginal shares model, we compare the pattern of expenditures and the revenues structure before and after the Revolution