Measuring government growth in the Canadian provinces: Decomposing real growth and deflator effects

In this paper, we argue that, when measuring government growth, we should d istinguish among three growth phenomena: growth resulting from the broader scope of government activity, referred to as real growth; growth that resul ts from higher costs of providing government goods and services, referred t o as deflator effect; and growth in the simple ratio of government expendit ure to gross domestic product (GDP), nominal growth, which is due to the co mbined impact of real growth and deflator effect. Using data on provincial government spending, we show that, over the 1971-95 period, there has been no real growth in three provinces and that there has been a substantial def lator effect on provincial government growth in all ten provinces.