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Federal Legislative Activism in Australia: A New Approach to Testing Wagner's Law

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  • Stephen Kirchner

Abstract

Legislation is an important output of the political process. Growth in legislation can serve as a proxy for growth in the size and role of government, side-stepping some of the endogeneity problems encountered in estimating relationships between government spending and revenue and national income. This paper considers the relationship between government growth and real GDP per capita by developing three models of federal legislative output in Australia since the country's founding in 1901. The models explain growth in (1) the number of acts of parliament; (2) the total number of pages of legislation enacted; and (3) a measure of legislative complexity based on the annual average number of pages per act. The growth in the number of acts is found to be negatively related to growth in real national income per capita in the short-run, implying that legislative output responds to temporary economic shocks, but without a robust long-run relationship with the level of income. The growth in the number of pages of legislation enacted and legislative complexity also show a negative short-run relationship with growth in real national income per capita, but a positive long-run relationship with the level of income that is consistent with Wagner's (1890) law of 'increasing state activity.' However, both the short and long-run relationships are statistically significant only for the post-World War II period, raising questions about the general applicability of Wagner's law.

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File URL: http://www.finance.uts.edu.au/research/wpapers/wp161.pdf
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Bibliographic Info

Paper provided by Finance Discipline Group, UTS Business School, University of Technology, Sydney in its series Working Paper Series with number 161.

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Length: 19
Date of creation: 01 Jul 2010
Date of revision:
Publication status: Published as: Kirchner, S., 2012, "Federal Legislative Activism in Australia: A New Approach to Testing Wagner's Law", Public Choice, 153(3-4), 375-392.
Handle: RePEc:uts:wpaper:161

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Keywords: Wagner’s law; Australia; legislation; economic growth;

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  1. Durevall, Dick & Henrekson, Magnus, 2010. "The Futile Quest for a Grand Explanation of Long-Run Government Expenditure," Working Paper Series 818, Research Institute of Industrial Economics, revised 28 Oct 2010.
  2. 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 & Francis Journals, vol. 14(8), pages 577-589.
  3. 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.
  4. William Easterly & Sergio Rebelo, 1994. "Fiscal Policy and Economic Growth: An Empirical Investigation," NBER Working Papers 4499, National Bureau of Economic Research, Inc.
  5. Neil R. Ericsson & James G. MacKinnon, 2002. "Distributions of error correction tests for cointegration," Econometrics Journal, Royal Economic Society, vol. 5(2), pages 285-318, 06.
  6. Dollery, Brian & Singh, Sukvinder, 2000. "Explaining the Real Size of Government in Australia: An Application of the Ferris and West Model," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, vol. 30(2), pages 157-173, September.
  7. Cameron A. Shelton, 2007. "The Size and Composition of Government Expenditure," Wesleyan Economics Working Papers 2007-002, Wesleyan University, Department of Economics.
  8. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
  9. Shelton, Cameron A., 2007. "The size and composition of government expenditure," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2230-2260, December.
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