8 Government current expenditure on goods and services

Printable version (PDF) of Chapter 8 (June 30, 2008)

Introduction

8.1 Canadian governments play an important role in the national economy. One way in which this role is evident is as a producer of public goods and services. Some government-produced goods and services cannot be provided by non-government producers, such as the administration of justice or military defence. Canadians prefer other goods and services to be provided by their governments, such as most education and health-care services. The value of the goods and services produced by Canadian governments must be included in gross domestic product for that measure to accurately describe the economy.

8.2 The value of the goods and services produced by government is estimated in two places in the Income and Expenditure Accounts (IEA): government current expenditure on goods and services and government gross fixed capital formation. These aggregates are two of the components of expenditure-based gross domestic product (GDP) and, as such, represent the direct contribution of the government sector to aggregate economic activity.

8.3 Canadian governments also redistribute income and provide economic incentives to influence behaviour. A comprehensive depiction of government economic activity is presented in the IEA government sector accounts (see Chapter 1 and Chapter 2). In these accounts government income is disaggregated into various taxes and transfers, investment income and sales of goods and services. Government outlay components include purchases of goods and services, transfers to persons, to businesses, to non-residents and interest on the public debt.

8.4 While this chapter is devoted to the sources and methods used in estimating government current expenditure on goods and services, it should be kept in mind that an analysis of the role of governments in the national economy should include statistical information presented in other aggregates of the IEA and in other parts of the Canadian System of National Accounts (CSNA) such as the Financial Flow Accounts and the National Balance Sheet Accounts, produced by the Income and Expenditure Accounts Division (IEAD), the Public Sector Statistics, produced by the Public Institutions Division and Canada's International Investment Position, produced by the Balance of Payments Division.

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