ABSTRACT
This chapter focuses on the economic issues of measurement of public sector outputs and the supply and demand for government expenditures. The seminal view on the behavior of public expenditures over time is Adolph Wagner's notion that the share of the public sector in the economy will rise as economic growth proceeds. Except for a few time-series studies, the great preponderance of empirical analysis of public expenditures in the United States has been of the cross-sectional variety. Given the unit of analysis, empirical studies of public expenditure can be characterized by the nature of the dependent variable and the kinds of independent variables chosen to account for its variation. Analogously to taxation, incidence and shifting of public expenditure may be defined as the final resting place of the benefits of expenditures and the process by which benefits to the recipient are transferred to the bearer of the ultimate incidence.
