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Explaining the Growth of Government Spending in South Africa

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  • James Alm

    ()
    (Department of Economics, Tulane University)

  • Abel Embaye

    ()
    (Department of Economics, Andrew Young School of Policy Studies, Georgia State University)

Abstract

What determines government spending in South Africa? The paper estimates the determinants of real per capita government spending in the Republic of South Africa, using annual data for the period 1960 to 2007, a tumultuous period during which South Africa experienced a variety of internally imposed changes (e.g., the abolition of apartheid, changes in political institutions) and externally generated shocks (e.g., war, oil shocks). Using multivariate cointegration techniques, we find that per capita government spending, per capita income, the tax share, and the wage rate are cointegrated, a result that supports the notion that government spending is associated not only with per capita income and the true cost of government service provision as given by the wage rate but also to the fiscal illusion caused by budget deficits. We also find evidence that per capita government spending was positively affected by external shocks. These external shocks seem to play a significant role in explaining the dynamics of government spending growth.

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File URL: http://econ.tulane.edu/RePEc/pdf/tul1105.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by Tulane University, Department of Economics in its series Working Papers with number 1105.

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Length: 22 pages
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:tul:wpaper:1105

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Keywords: median voter theorem; government spending; cointegration; unit roots; error correction method;

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  10. Emmanuel Ziramba, 2008. "Wagner'S Law: An Econometric Test For South Africa, 1960-2006," South African Journal of Economics, Economic Society of South Africa, vol. 76(4), pages 596-606, December.
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Cited by:
  1. Mabugu, Ramos & Robichaud, Veronique & Maisonnave, Helene & Chitiga, Margaret, 2013. "Impact of fiscal policy in an intertemporal CGE model for South Africa," Economic Modelling, Elsevier, vol. 31(C), pages 775-782.
  2. Kojo Menyah & Yemane Wolde-Rufael, 2012. "Wagner'S Law Revisited: A Note From South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 80(2), pages 200-208, 06.

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