Un modèle de dépenses provinciales

Abstract

The paper develops a formal theoretical model of expenditures for a typical Canadian provincial government. The model is kept simple but useful by restricting the endogenous variables to four important budgetary categories: highway spending, hospital care expenditures, spending on schools and universities, and "all other" spending. Tax rates are also endogenous to the system. The choice of these four expenditure categories is linked to the original motivation for the model, which was to assist in explaining provincial construction spending. The theory has three elements: first, a utility function, which depends positively on the amounts provided of government services of various kinds, as well as on the income left to the public after taxes and borrowing; second, a budget constraint linking expenditures and revenues; and finally, a set of equations which show how much spending is required in order to provide the quantities of services entering as arguments into the utility function.