Saten Kumar (Department of Business Economics, Auckland University of Technology) Don J. Webber () (Department of Business Economics, Auckland University of Technology and Department of Economics, UWE, Bristol) Scott Fargher (Department of Business Economics, Auckland University of Technology)
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Wagner’s Law states that the share of government expenditure in GNP will increase with economic development; many associated empirical studies substitute GNP with GDP. This paper presents an empirical investigation into the validity of Wagner’s Law for New Zealand over the period 1960-2007 and compares the results obtained using these two measures of output. Application of the autoregressive distributed lag bounds test suggests a cointegrating relationship between either output measure and the share of government spending, and further application of General to Specific, Engle and Granger, Phillip Hansen’s Fully Modified Ordinary Least Squares and Johansen’s time series techniques illustrate statistical robustness and an income elasticity between 0.56 and 0.84. The results suggest that output measures Granger-cause the share of government expenditure in the long run, thereby providing support for Wagner’s Law, and these results are stable irrespective of the chosen output measure.
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Paper provided by University of the West of England, Department of Economics in its series Discussion Papers with number
0917.
Find related papers by JEL classification: C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
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