The Cost of Government: Decomposing Provincial Expenditures, 1981-2007

Haizhen Mou, Michael M. Atkinson and Ata Ul-Munim

Canadian Public Policy, 2014, vol. 40, issue 1, 84-97

Abstract: Debates about the size of government, which are often debates about what government should or should not do, need to be joined by a concern for the relative cost of government. Since 1981, the price in the public sector has grown faster than the price for GDP. We decompose the ratio between the price index for the public sector and that for GDP in the Canadian provinces and capture the governments' price advantage/disadvantage in different spending categories. Our analysis shows that governments with lower debt ratios and weaker fiscal rules are more vulnerable to rising costs, particularly during periods of higher commodity prices.

Date: 2014
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