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An econometric test of Wagner's law for six countries based on cointegration and error-correction modelling techniques

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  • Tsangyao Chang

Abstract

The present study empirically examined five different versions of Wagner's law by employing annual time-series data on six countries over the period 1951-1996. Three countries are part of the emerging industrialized countries of Asia (South Korea, Taiwan, Thailand) and three are industrialized countries (Japan, USA, and the United Kingdom). The analysis is an advance over previous work in two ways: first, the stationarity propertities of the data and the order of integration of the data are empirically investigated using the Augmented Dickey-Fuller (ADF) and the Kwiatkowski et al. (Journal of Econometrics, 1, 1992) (KPSS), tests and second, the hypothesis of a long-run relationship between income and government spending is tested using bivariate cointegrated systems and employing the methodology of cointegration analysis as suggested by Johansen (Journal of Economic Dynamics and Control, 12, 1988) and Johansen and Juselius (Oxford Bulletin of Economics and Statistics, 52, 1990). The results indicate that there exist a long-run relationship between income and government spending for sample countries studied with the exception of Thailand. Furthermore, it is found that the results concerning the validity of Wagner's Law are also held for selected countries studied with the exception of Thailand.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 34 (2002)
Issue (Month): 9 ()
Pages: 1157-1169

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Handle: RePEc:taf:applec:v:34:y:2002:i:9:p:1157-1169

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Cited by:
  1. Dimitrios Sideris, 2007. "Wagner's Law in 19th Century Greece: A Cointegration and Causality Analysis," Working Papers 64, Bank of Greece.
  2. Christoph Schaltegger & Benno Torgler, 2006. "Growth effects of public expenditure on the state and local level: evidence from a sample of rich governments," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 38(10), pages 1181-1192.
  3. Kähler, Jürgen, 2009. "Die Messung der Agglomeration als latente Variable und ihr Einfluss auf Staatsausgaben," Forschungs- und Sitzungsberichte der ARL: Aufsätze, in: Öffentliche Finanzströme und räumliche Entwicklung, pages 239-264 Akademie für Raumforschung und Landesplanung (ARL) - Leibniz-Forum für Raumwissenschaften.
  4. Alimi, R. Santos, 2013. "Testing Augmented Wagner’s Law for Nigeria Based on Cointegration and Error-Correction Modelling Techniques," MPRA Paper 52319, University Library of Munich, Germany.
  5. 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, Chung-Ang Unviersity, Department of Economics, vol. 31(2), pages 139-148, December.
  6. Saten Kumar & Don J. Webber & Scott Fargher, 2012. "Wagner's Law revisited: cointegration and causality tests for New Zealand," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 44(5), pages 607-616, February.
  7. Brückner, Markus & Chong, Alberto & Gradstein, Mark, 2012. "Estimating the permanent income elasticity of government expenditures: Evidence on Wagner's law based on oil price shocks," Journal of Public Economics, Elsevier, vol. 96(11), pages 1025-1035.
  8. Santiago Herrera & Gaobo Pang, 2006. "How Efficient is Public Spending in Education?," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, BANCO DE LA REPÚBLICA - ESPE.
  9. Alfonso Arpaia & Alessandro Turrini, 2008. "Government expenditure and economic growth in the EU: long-run tendencies and short-term adjustment," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 300, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  10. Manuel Jaen-Garcia, 2011. "Empirical Analysis of Wagner’s Law for the Spain’s Regions," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 1(1), pages 1-17, November.
  11. Paresh Kumar Narayan & Ingrid Nielsen & Russell Smyth, 2006. "Panel Data, Cointegration, Causality And Wagner'S Law: Empirical Evidence From Chinese Provinces," Monash Economics Working Papers 01/06, Monash University, Department of Economics.
  12. Herrera, Santiago & Pang, Gaobo, 2005. "Efficiency of public spending in developing countries : an efficiency frontier approach," Policy Research Working Paper Series 3645, The World Bank.
  13. 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.
  14. V. Chandran Govindaraju & Ramesh Rao & Sajid Anwar, 2011. "Economic growth and government spending in Malaysia: a re-examination of Wagner and Keynesian views," Economic Change and Restructuring, Springer, vol. 44(3), pages 203-219, August.

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