IDEAS home Printed from https://ideas.repec.org/a/spr/empeco/v59y2020i4d10.1007_s00181-019-01686-5.html
   My bibliography  Save this article

Testing for structural changes in the Wagner’s Law for a sample of East Asian countries

Author

Listed:
  • Saten Kumar

    (Auckland University of Technology)

  • Zhaoyi Cao

    (Auckland University of Technology)

Abstract

This paper examines the Wagner’s Law for a sample of East Asian countries (China, Hong Kong, Japan and South Korea) by utilizing the structural break methods viz., Gregory and Hansen (J Econom 70:99–126, 1996a; Oxf Bull Econ Stat 58:555–559, 1996b), Carrion-i-Silvestre and Sanso (Oxf Bull Econ Stat 68:623–646, 2006) and Bai and Perron (Econometrica 66:47–78, 1998; J Appl Econom 18:1–22, 2003). We find that there exists weak cointegrating relationship between the log of nominal public expenditure as a share of nominal GDP to the log of real per capita GDP. However, we find support for the Wagner’s Law when the relationship is extended to include a measure of the population structure—the dependency ratio. Our findings support the explanations suggested by Durevall and Henrekson (J Public Econ 95(7–8):708–722, 2011).

Suggested Citation

  • Saten Kumar & Zhaoyi Cao, 2020. "Testing for structural changes in the Wagner’s Law for a sample of East Asian countries," Empirical Economics, Springer, vol. 59(4), pages 1959-1976, October.
    • Handle: RePEc:spr:empeco:v:59:y:2020:i:4:d:10.1007_s00181-019-01686-5
    DOI: 10.1007/s00181-019-01686-5
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00181-019-01686-5
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00181-019-01686-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Adolph Wagner, 1958. "Three Extracts on Public Finance," International Economic Association Series, in: Richard A. Musgrave & Alan T. Peacock (ed.), Classics in the Theory of Public Finance, pages 1-15, Palgrave Macmillan.
    2. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    3. Durevall, Dick & Henrekson, Magnus, 2011. "The futile quest for a grand explanation of long-run government expenditure," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 708-722, August.
    4. Yaya Keho, 2016. "Testing Wagner's Law in the Presence of Structural Changes: New Evidence from Six African Countries (1960-2013)," International Journal of Economics and Financial Issues, Econjournals, vol. 6(1), pages 1-6.
    5. Norman Gemmell (ed.), 1993. "The Growth Of The Public Sector," Books, Edward Elgar Publishing, number 176.
    6. Gregory, Allan W & Hansen, Bruce E, 1996. "Tests for Cointegration in Models with Regime and Trend Shifts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 555-560, August.
    7. Tsangyao Chang & WenRong Liu & Steven Caudill, 2004. "A re-examination of Wagner's law for ten countries based on cointegration and error-correction modelling techniques," Applied Financial Economics, Taylor & Francis Journals, vol. 14(8), pages 577-589.
    8. Lamartina Serena & Zaghini Andrea, 2011. "Increasing Public Expenditure: Wagner’s Law in OECD Countries," German Economic Review, De Gruyter, vol. 12(2), pages 149-164, May.
    9. Nadeem Burney, 2002. "Wagner's hypothesis: evidence from Kuwait using cointegration tests," Applied Economics, Taylor & Francis Journals, vol. 34(1), pages 49-57.
    10. Akitoby, Bernardin & Clements, Benedict & Gupta, Sanjeev & Inchauste, Gabriela, 2006. "Public spending, voracity, and Wagner's law in developing countries," European Journal of Political Economy, Elsevier, vol. 22(4), pages 908-924, December.
    11. Bharat Kolluri & Michael Panik & Mahmoud Wahab, 2000. "Government expenditure and economic growth: evidence from G7 countries," Applied Economics, Taylor & Francis Journals, vol. 32(8), pages 1059-1068.
    12. Chiung-Ju Huang, 2006. "Government Expenditures In China And Taiwan: Do They Follow Wagner¡¯S Law?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 31(2), pages 139-148, December.
    13. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
    14. Shelton, Cameron A., 2007. "The size and composition of government expenditure," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2230-2260, December.
    15. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    16. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-858, May.
    17. Pistoresi, Barbara & Rinaldi, Alberto & Salsano, Francesco, 2017. "Government spending and its components in Italy, 1862–2009: Drivers and policy implications," Journal of Policy Modeling, Elsevier, vol. 39(6), pages 1117-1140.
    18. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May.
    19. Yoshito Funashima & Kazuki Hiraga, 2017. "Wagner’s law, fiscal discipline, and intergovernmental transfer: empirical evidence at the US and German state levels," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(4), pages 652-677, August.
    20. Jan Kuckuck, 2012. "Testing Wagner's Law at Different Stages of Economic Development - A Historical Analysis of Five Western European Countries," IEER Working Papers 91, Institute of Empirical Economic Research, Osnabrueck University.
    21. Engle, R. F. & Granger, C. W. J. (ed.), 1991. "Long-Run Economic Relationships: Readings in Cointegration," OUP Catalogue, Oxford University Press, number 9780198283393.
    22. Ying-Foon Chow & John Cotsomitis & Andy Kwan, 2002. "Multivariate cointegration and causality tests of Wagner's hypothesis: evidence from the UK," Applied Economics, Taylor & Francis Journals, vol. 34(13), pages 1671-1677.
    23. Beyer, Andreas & Dewald, William G. & Haug, Alfred A., 2009. "Structural breaks, cointegration and the Fisher effect," Working Paper Series 1013, European Central Bank.
    24. Anisul Islam, 2001. "Wagner's law revisited: cointegration and exogeneity tests for the USA," Applied Economics Letters, Taylor & Francis Journals, vol. 8(8), pages 509-515.
    25. Kurozumi, Eiji, 2002. "Testing for stationarity with a break," Journal of Econometrics, Elsevier, vol. 108(1), pages 63-99, May.
    26. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
    27. Josep Lluís Carrion‐i‐Silvestre & Andreu Sansó, 2006. "Testing the Null of Cointegration with Structural Breaks," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(5), pages 623-646, October.
    28. M. I. Ansari & D. V. Gordon & C. Akuamoah, 1997. "Keynes versus Wagner: public expenditure and national income for three African countries," Applied Economics, Taylor & Francis Journals, vol. 29(4), pages 543-550.
    29. Abizadeh, Sohrab & Yousefi, Mahmood, 1998. "An empirical analysis of South Korea's economic development and public expenditures growth," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 27(6), pages 687-700.
    30. Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, November.
    31. Niloy Bose & M. Emranul Haque & Denise R. Osborn, 2007. "Public Expenditure And Economic Growth: A Disaggregated Analysis For Developing Countries," Manchester School, University of Manchester, vol. 75(5), pages 533-556, September.
    32. Maddalena Cavicchioli & Barbara Pistoresi, 2016. "Testing threshold cointegration in Wagner's Law: the role of military spending," Center for Economic Research (RECent) 116, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    33. Yoshito Funashima, 2017. "Wagner’s law versus displacement effect," Applied Economics, Taylor & Francis Journals, vol. 49(7), pages 619-634, February.
    34. Dimitrios Sideris, 2007. "Wagner's Law in 19th Century Greece: A Cointegration and Causality Analysis," Working Papers 64, Bank of Greece.
    35. Cavicchioli, Maddalena & Pistoresi, Barbara, 2016. "Testing threshold cointegration in Wagner's Law: The role of military spending," Economic Modelling, Elsevier, vol. 59(C), pages 23-31.
    36. Maddalena Cavicchioli & Barbara Pistoresi, 2016. "Testing threshold cointegration in Wagner's Law: the role of military spending," Department of Economics 0078, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Phan Thi Hang Nga & Pham Minh Tien, 2024. "The impact of public expenditure on economic growth in Vietnamese localities: Research in the context of the impact of Covid-19," HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE - ECONOMICS AND BUSINESS ADMINISTRATION, HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE, HO CHI MINH CITY OPEN UNIVERSITY, vol. 14(1), pages 50-64.
    2. Nayak, Dinesh Kumar & Hazarika, Bhabesh, 2022. "Linkage between Income and Government Expenditure at Indian Sub-nationals: A Second Generation Panel Co-integration Techniques," Working Papers 22/374, National Institute of Public Finance and Policy.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Philip Arestis & Hüseyin Şen & Ayşe Kaya, 2021. "On the linkage between government expenditure and output: empirics of the Keynesian view versus Wagner’s law," Economic Change and Restructuring, Springer, vol. 54(2), pages 265-303, May.
    2. Kumar, Saten, 2009. "Further Evidence on Public Spending and Economic Growth in East Asian Countries," MPRA Paper 19298, University Library of Munich, Germany.
    3. Irandoust, Manuchehr, 2019. "Wagner on government spending and national income: A new look at an old relationship," Journal of Policy Modeling, Elsevier, vol. 41(4), pages 636-646.
    4. Ebaid Ali & Bahari Zakaria, 2019. "The Nexus between Government Expenditure and Economic Growth: Evidence of the Wagner’s Law in Kuwait," Review of Middle East Economics and Finance, De Gruyter, vol. 15(1), pages 1-9, April.
    5. Cosimo Magazzino, 2012. "The Nexus between Disaggregated Public Spending and GDP in the Euro Area," Economics Bulletin, AccessEcon, vol. 32(3), pages 2560-2579.
    6. Yoshito Funashima & Kazuki Hiraga, 2017. "Wagner’s law, fiscal discipline, and intergovernmental transfer: empirical evidence at the US and German state levels," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(4), pages 652-677, August.
    7. Magazzino, Cosimo, 2010. "Wagner's law and augmented Wagner's law in EU-27. A time-series analysis on stationarity, cointegration and causality," MPRA Paper 26668, University Library of Munich, Germany.
    8. Magazzino, Cosimo, 2012. "Wagner versus Keynes: Public spending and national income in Italy," Journal of Policy Modeling, Elsevier, vol. 34(6), pages 890-905.
    9. Omoshoro-Jones, Oyeyinka Sunday, 2016. "A Cointegration and Causality Test on Government Expenditure –Economic Growth Nexus: Empirical Evidence from a South African Province," MPRA Paper 102085, University Library of Munich, Germany, revised 17 Oct 2017.
    10. Burak Sencer Atasoy & Timur Han Gür, 2016. "Does the Wagner’s Hypothesis Hold for China? Evidence from Static and Dynamic Analyses," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 63(1), pages 45-60, March.
    11. Saten Kumar & Don J. Webber & Scott Fargher, 2012. "Wagner's Law revisited: cointegration and causality tests for New Zealand," Applied Economics, Taylor & Francis Journals, vol. 44(5), pages 607-616, February.
    12. Matteo Mogliani, 2010. "Residual-based tests for cointegration and multiple deterministic structural breaks: A Monte Carlo study," Working Papers halshs-00564897, HAL.
    13. Travaglini, Guido, 2007. "The U.S. Dynamic Taylor Rule With Multiple Breaks, 1984-2001," MPRA Paper 3419, University Library of Munich, Germany, revised 15 Jun 2007.
    14. Tarlok Singh, 2017. "Are Current Account Deficits in the OECD Countries Sustainable? Robust Evidence from Time-Series Estimators," The International Trade Journal, Taylor & Francis Journals, vol. 31(1), pages 29-64, January.
    15. Sheilla Nyasha & Nicholas M. Odhiambo, 2019. "Government Size and Economic Growth: A Review of International Literature," SAGE Open, , vol. 9(3), pages 21582440198, September.
    16. Durevall, Dick & Henrekson, Magnus, 2011. "The futile quest for a grand explanation of long-run government expenditure," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 708-722, August.
    17. Marco Gallegati & Massimo Tamberi, 2022. "Long swings in the growth of government expenditure: an international historical perspective," Public Choice, Springer, vol. 192(3), pages 227-248, September.
    18. Chor Foon Tang & Ilhan Ozturk, 2017. "Can Inflation be Claimed as a Monetary Phenomenon? The Malaysian Experience," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 453-460.
    19. Katircioğlu, Salih Turan, 2014. "Testing the tourism-induced EKC hypothesis: The case of Singapore," Economic Modelling, Elsevier, vol. 41(C), pages 383-391.
    20. Beyer, Andreas & Dewald, William G. & Haug, Alfred A., 2009. "Structural breaks, cointegration and the Fisher effect," Working Paper Series 1013, European Central Bank.

    More about this item

    Keywords

    Government spending; Dependency ratio; Cointegration; Structural breaks;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:empeco:v:59:y:2020:i:4:d:10.1007_s00181-019-01686-5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.