The objective of the Canada Research Chair in Economics is to develop an innovative research program that quantifies the impact of government provision of public goods on policy-relevant economic outcomes. The research program takes advantage of public policy changes that generate quasi-experimental exogenous variations in the government provision of public goods, and the availability of detailed datasets for Italy and Québec to quantify the impact that the government provision of public goods has on economic factors associated with long-term economic development. The research program will provide policy recommendations to policy-makers in Canada and around the world.
Government spending for public goods plays a central role in modern economies.1 According to the OECD, the size of government spending relative to GDP has diminished in OECD member countries since 1995. This trend is expected to persist in the medium/long run due to austerity measures (i.e., fiscal rules) included in present and presumably future budgets. Budget tightening will likely result in a drop in the quantity of public goods provided by governments. Consequently, governments will need to be more efficient in the provision of scarce public goods. Understanding the impact of variations in the quantity and the efficiency in the provision of public goods represents a primary task for social scientists. In the absence of experimental evidence, however, establishing a causal link between variations in the government provision of public goods and economic outcomes is challenging. This is because public goods are usually provided with the objective of affecting economic outcomes, and therefore are endogenously determined together with economic outcomes. Disentangling the direction of causality between these two policy relevant variables requires a rigorous econometric identification strategy.