Some Second Thoughts on Wagner's Law
AbstractWe examine whether the Samuelsonian definition of public goods can be reconciled with "Wagner's Law", that is, public expenditures outpacing economic growth. While both predominantly focus on the demand-side, they differ with respect to their socio-political foundations. Taking the latter into account, and acknowledging that empirical studies are not generally supportive of individual income elasticities systematically differing between public and private goods, we find that Wagner's notion of the role of public-sector issues is even at odds with his own dictum. Implicit in Samuelson, by contrast, is the prediction that public spending decreases relative to GNP when income grows, provided that the income distribution remains constant. If this is not the case it can be shown that a growing inequality increases government's share et vice versa which can lead to counteractive forces on the GNP ratio.
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Bibliographic InfoPaper provided by Helmut Schmidt University, Hamburg in its series Working Paper with number 54/2006.
Length: 29 pages
Date of creation: Dec 2006
Date of revision:
Wagner's Law; public expenditures; public goods; budget-to-GNP ratio;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
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