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Wagner's Law, Relative Prices and the Size of the Public Sector

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  • Gemmell, Norman

Abstract

This paper examines the effects on the size of the government sector of changes in per capita income, population and relative output prices, using a recently revised internationally comparable data set for 117 countries. The main hypotheses considered are (1) does Wagner's 'law' hold? ( b) does government output respond to price changes? (c) does government produce mainly 'pure' private or public goods? Cross-section and time-series evidence suggests (i) almost no support for Wagner's 'law'; (ii) relative prices are important for government output; and (iii) the hypothesis that governments produce pure private goods is generally accepted. These results differ from most previous studies which have ignored relative price effects and constrained income and population elasticities. Copyright 1990 by Blackwell Publishers Ltd and The Victoria University of Manchester

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Bibliographic Info

Article provided by University of Manchester in its journal The Manchester School of Economic & Social Studies.

Volume (Year): 58 (1990)
Issue (Month): 4 (December)
Pages: 361-77

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Handle: RePEc:bla:manch2:v:58:y:1990:i:4:p:361-77

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Cited by:
  1. Thomas E. Borcherding & Dong Lee, 2002. "The Growth of the Relative Size of Government," Claremont Colleges Working Papers 2002-05, Claremont Colleges.
  2. D.P. Doessel & Abbas Valadkhani, 2002. "Public Finance and The Size of Government: A Literature Review and Econometric Results for Fiji," School of Economics and Finance Discussion Papers and Working Papers Series 108, School of Economics and Finance, Queensland University of Technology.
  3. Doessel, Darrel & Valadkhani, Abbas, 2003. "The Demand for Current Public Expenditure in Fiji: Theory and Empirical Results," MPRA Paper 50391, University Library of Munich, Germany.
  4. George Tridimas & Stanley L. Winer, 2004. "A Contribution to the Political Economy of Government Size: 'Demand', 'Supply' and 'Political Influence'," Carleton Economic Papers 04-04, Carleton University, Department of Economics.
  5. Gemmell, Norman & Morrissey, Oliver & Pinar, Abuzer, 1999. "Fiscal illusion and the demand for government expenditures in the UK," European Journal of Political Economy, Elsevier, vol. 15(4), pages 687-704, November.
  6. Tridimas, George & Winer, Stanley L., 2005. "The political economy of government size," European Journal of Political Economy, Elsevier, vol. 21(3), pages 643-666, September.

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