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Wagner's Law in 19th Century Greece: A Cointegration and Causality Analysis

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  • Dimitrios Sideris

    () (Bank of Greece and University of Ioannina)

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    Abstract

    The validity of Wagner’s law, which states that the growth of public expenditure can be explained as a result of the increase in economic activity, is tested for Greece during the period 1833-1938. This represents a period of growth, industrialisation and modernisation of the economy, conditions which should be conducive to Wagner’s law. In addition, the long data sample ensures the reliability of the results in terms of economic significance and statistical inference. Cointegration analysis provides positive evidence for the existence of a long-run relationship between government expenditure and national income, and Granger causality tests indicate that causality runs from income to government expenditure. The results support Wagner’s hypothesis, in line with other empirical studies examining the validity of the hypothesis in 19th century economies.

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    Paper provided by Bank of Greece in its series Working Papers with number 64.

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    Length: 19 pages
    Date of creation: Dec 2007
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    Handle: RePEc:bog:wpaper:64

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    Keywords: Public expenditure; Wagner’s law; cointegration.;

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    References

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    1. A. F. Al-Faris, 2002. "Public expenditure and economic growth in the Gulf Cooperation Council countries," Applied Economics, Taylor and Francis Journals, vol. 34(9), pages 1187-1193.
    2. Mahmoud Wahab, 2004. "Economic growth and government expenditure: evidence from a new test specification," Applied Economics, Taylor and Francis Journals, vol. 36(19), pages 2125-2135.
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    4. Anisul Islam, 2001. "Wagner's law revisited: cointegration and exogeneity tests for the USA," Applied Economics Letters, Taylor and Francis Journals, vol. 8(8), pages 509-515.
    5. 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 and Francis Journals, vol. 14(8), pages 577-589.
    6. Oxley, Les, 1994. "Cointegration, Causality and Wagner's Law: A Test for Britain 1870-1913," Scottish Journal of Political Economy, Scottish Economic Society, vol. 41(3), pages 286-98, August.
    7. Tridimas, George, 2001. " The Economics and Politics of the Structure of Public Expenditure," Public Choice, Springer, vol. 106(3-4), pages 299-316, March.
    8. Tsangyao Chang, 2002. "An econometric test of Wagner's law for six countries based on cointegration and error-correction modelling techniques," Applied Economics, Taylor and Francis Journals, vol. 34(9), pages 1157-1169.
    9. John Thornton, 1999. "Cointegration, causality and Wagner's Law in 19th century Europe," Applied Economics Letters, Taylor and Francis Journals, vol. 6(7), pages 413-416.
    10. Bharat Kolluri & Michael Panik & Mahmoud Wahab, 2000. "Government expenditure and economic growth: evidence from G7 countries," Applied Economics, Taylor and Francis Journals, vol. 32(8), pages 1059-1068.
    11. Massimo Florio & Sara Colautti, 2005. "A logistic growth theory of public expenditures: A study of five countries over 100 years," Public Choice, Springer, vol. 122(3), pages 355-393, March.
    12. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, August.
    13. Nikolaos Dritsakis & Antonis Adamopoulos, 2004. "A causal relationship between government spending and economic development: an empirical examination of the Greek economy," Applied Economics, Taylor and Francis Journals, vol. 36(5), pages 457-464.
    14. John Loizides & George Vamvoukas, 2005. "Government expenditure and economic growth: Evidence from trivariate causality testing," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 125-152, May.
    15. Hondroyiannis, George & Papapetrou, Evangelia, 1995. "An Examination of Wagner's Law for Greece: A Cointegration Analysis," Public Finance = Finances publiques, , vol. 50(1), pages 67-79.
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    Cited by:
    1. Alexander Apostolides, 2008. "How Similar to South-Eastern Europe were the Islands of Cyprus and Malta in terms of Agricultural Output and Credit? Evidence during the Interwar Period," Working Papers 80, Bank of Greece.
    2. Zarko Lazarevic, 2008. "Banking Performance in South-Eastern Europe During the Interwar Period," Working Papers 79, Bank of Greece.
    3. Roumen Avramov & Dragana Gnjatovic, 2008. "Stabilization Policies in Bulgaria and Yugoslavia During Communism's Terminal Years : 1980s Economic Visions in Retrospect," Working Papers 81, Bank of Greece.
    4. 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.
    5. Sophia Lazaretou, 2008. "Banking and Central Banking in Pre-WWII Grecce: Money and Currency Developments," Working Papers 86, Bank of Greece.
    6. Kumar, Saten, 2009. "Further Evidence on Public Spending and Economic Growth in East Asian Countries," MPRA Paper 19298, University Library of Munich, Germany.
    7. Yuksel Gormez, 2008. "Banking in Turkey: History and Evolution," Working Papers 83, Bank of Greece.
    8. Magazzino, Cosimo, 2010. "Wagner's law and Italian disaggregated public spending: some empirical evidences," MPRA Paper 26662, University Library of Munich, Germany.

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