The Size, Growth, and Composition of Government: Analysis and Evidence for Canada and the United States

Abstract

The topic of measuring the growth and size of government, on which there is now a robust literature and policy debate, held little interest for economists in the 18th and 19th centuries and throughout much of the 20th century. Although it is a bit dangerous to date when perceptions of the importance of the topic began to shift, a good place to start is with Richard Bird's research for the Canadian Tax Foundation in 1970 on the growth of government spending in Canada. The purpose of this paper is to briefly review what Bird recognized is an evolutionary process, and then to examine the manner in which the growth and size of government can be measured in Canada and the United States. The trends in four key measures following the Second World War are defined and documented. The paper reveals two especially important features. The first is the increase in the role of the subnational government sector. The second is that, in both countries, the public sector is trending away from spending on (and taxing for) the public's physical infrastructure and toward transfers to individuals, particularly in the form of health and income security programs.