Postprint version. Published in Economics Letters, Volume 35, Issue 3, March 1, 1991, pages 307-310. Copyright © 1991 Elsevier. The definitive version is available at http://dx.doi.org/10.1016/0165-1765(91)90149-F.
This paper studies the hypothesis that controls on on-budget government spending leads to greater off-budget activity. Existence of a substitution effect suggests that our ability to control and measure the size of government is more difficult than previously thought.