What Drives Democratic Government Expenditures? Evidence from Canadian Provincial Governments

Abstract

This thesis aims at analyzing the drivers of provincial government spending on health care, education and municipal services from the perspectives of the median voter and political budget cycle models. A panel of province-level data for the period 1989 to 2009 is used with FGLS and GMM estimation methods. The results show that median income is positively related with both health and education spending, while the tax-price faced by the median voter is negatively associated with both health and municipal services spending. Population density has a positive link with education spending but inversely related to municipal services spending. Increases in income inequality raise provincial spending on education and municipal services. The effects of the age-cohorts on these expenditures are program-specific. The predictions of the political budget cycle models indicate that although there is a tendency for the expenditures on these three programs to increase in election-years, only the cyclical effects on health and municipal services are statistically significant.