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Wagner versus Keynes: Empirical Evidence from Turkey’s Provinces

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  • Ersin Nail Sagdic
  • Mahmut Unsal Sasmaz
  • Guner Tuncer

Abstract

Wagner’s law and Keynes’ hypothesis has long been debated in economics. In this paper, we test the income-expenditure hypothesis for eighty-one of Turkey’s provinces for the period 1992 to 2013 using panel data analysis. For this purpose, the validity of these hypotheses is tested by applying recent panel cointegration and causality techniques, allowing for cross-sectional dependence and heterogeneity between regions. Under the presence of cross-sectional dependence and heterogeneity, the level of integration of the variables was tested by means of the cross-sectionally augmented Dickey-Fuller test, the presence of long-run relationship of the variables was tested with the Westerlund-Edgerton Lagrange multiplier bootstrap test, long-run cointegration coefficients were estimated with the Eberhardt-Bond panel augmented mean group method, and finally causality relationship was defined by the Dumitrescu-Hurlin test. The results of this study provide strong support for the validity of Wagner’s law and Keynes’ hypothesis for Turkey. Key words: Wagner’s law, Public expenditures, Economic growth, Cointegration, Granger causality. JEL: C23, E60, E62, H50, H72

Suggested Citation

  • Ersin Nail Sagdic & Mahmut Unsal Sasmaz & Guner Tuncer, 2020. "Wagner versus Keynes: Empirical Evidence from Turkey’s Provinces," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 67(5), pages 657-674.
    • Handle: RePEc:voj:journl:v:67:y:2020:i:5:p:657-674:id:741
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    More about this item

    Keywords

    Wagner’s law; Public expenditures; Economic growth; Cointegration; Granger causality;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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