Spending By Canadian Provincial Governments 1961-92

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This paper investigates annual per adult spending by the ten provincial governments for the period 1962 to 1992 using a demand function model of public spending. The model is estimated using a panel data set of 310 observations covering ten provinces and thirty-one years. Real government spending per adult and its major subcomponents (transfers to persons, fixed investment and spending on goods and services) are the dependent variables. The estimating procedure corrects for groupwise heteroscedasticity and cross-group correlation. Among the conclusions are that provincial spending and its sub-components (particularly fixed investment) follow an electoral cycle, that left wing governments spend more than right wing governments (but not with respect to all spending components), that provincial governments adjust spending in response to unemployment, and that spending increases with increases in per capita income (but not to the extent predicted by Wagner's Law) and with decreases in the perceived tax price of services.