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Increasing Public Expenditures: Wagner’s Law in OECD Countries

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Author Info

  • Serena Lamartina

    (European Central Bank)

  • Andrea Zaghini

    () (Banca d’Italia & Center for Financial Studies, Frankfurt)

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    Abstract

    The paper proposes a panel cointegration analysis of the joint development of government expenditures and economic growth in 23 OECD countries. The empirical evidence provides indication of a structural positive correlation between public spending and per-capita GDP which is consistent with the so-called Wagner’s law. A long-run elasticity larger than one suggests a more than proportional increase of government expenditures with respect to economic activity. In addition, according to the spirit of the law, we found that the correlation is usually higher in countries with lower per-capita GDP, suggesting that the catching-up period is characterized by a stronger development of government activities with respect to economies in a more advanced state of development.

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    Bibliographic Info

    Paper provided by Center for Financial Studies in its series CFS Working Paper Series with number 2008/13.

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    Length: 25 pages
    Date of creation: Apr 2008
    Date of revision:
    Handle: RePEc:cfs:cfswop:wp200813

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    Related research

    Keywords: Fiscal Policy; Wagner’s Law; Panel Cointegration;

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    References

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    15. 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.
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    Cited by:
    1. Magazzino, Cosimo, 2011. "The nexus between public expenditure and inflation in the Mediterranean countries," MPRA Paper 28493, University Library of Munich, Germany.
    2. 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.
    3. 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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