This article applies an empirical model, based on the economic theory of public
choice, to the Group of Seven countries. It is discovered: (1) that deficit financing
does appear to contribute to increased real government spending; (2) that the
demand for government services as a whole does not appear to be income elastic;
(3) that there is some evidence of a productivity lag in the government sectors of
Canada, Japan, and the United States, but not in those of France, Italy, or the United
Kingdom; and (4) that in most countries there is some evidence of economies of scale
in the provision of government services.
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