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Increasing Public Expenditure: Wagner's Law in OECD Countries

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  • Serena Lamartina
  • Andrea Zaghini

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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Suggested Citation

  • Serena Lamartina & Andrea Zaghini, 2011. "Increasing Public Expenditure: Wagner's Law in OECD Countries," German Economic Review, Verein für Socialpolitik, vol. 12(2), pages 149-164, May.
  • Handle: RePEc:bla:germec:v:12:y:2011:i:2:p:149-164
    DOI: j.1468-0475.2010.00517.x
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    File URL: http://hdl.handle.net/10.1111/j.1468-0475.2010.00517.x
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    Citations

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    Cited by:

    1. Durevall, Dick & Henrekson, Magnus, 2011. "The futile quest for a grand explanation of long-run government expenditure," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 708-722, August.
    2. Sefa Awaworyi Churchill & Mehmet Ugur & Siew Ling Yew, 2017. "Does Government Size Affect Per-Capita Income Growth? A Hierarchical Meta-Regression Analysis," The Economic Record, The Economic Society of Australia, vol. 93(300), pages 142-171, March.
    3. Szarowska Irena, 2013. "Relationship between government expenditure and output in the problematic regions in the European Union," Экономика региона, CyberLeninka;Федеральное государственное бюджетное учреждение науки «Институт экономики Уральского отделения Российской академии наук», issue 4 (36), pages 190-199.
    4. Mahmoud M. Sabra, 2016. "Government size, country size, openness and economic growth in selected MENA countries," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 9(1), pages 39-45, April.
    5. Cosimo Magazzino, 2012. "The Nexus between Disaggregated Public Spending and GDP in the Euro Area," Economics Bulletin, AccessEcon, vol. 32(3), pages 2560-2579.
    6. Paparas, Dimitrios & Stoian, Andreea, 2016. "The validity of Wagner’s Law in Romania during 1995-2015," MPRA Paper 74378, University Library of Munich, Germany.
    7. repec:eee:rujoec:v:3:y:2017:i:3:p:221-239 is not listed on IDEAS
    8. Hassan Mohammadi & Rati Ram, 2015. "Economic Development and Government Spending: An Exploration of Wagner’s Hypothesis during Fifty Years of Growth in East Asia," Economies, MDPI, Open Access Journal, vol. 3(4), pages 1-11, October.
    9. António Afonso & José Alves, 2017. "Reconsidering Wagner’s law: evidence from the functions of the government," Applied Economics Letters, Taylor & Francis Journals, vol. 24(5), pages 346-350, March.
    10. 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.
    11. Manuel Jaen-Garcia, 2011. "Empirical Analysis of Wagner’s Law for the Spain’s Regions," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 1(1), pages 1-17, November.
    12. repec:voj:journl:v:63:y:2016:i:1:p:45-60 is not listed on IDEAS
    13. repec:nos:voprec:2017-09-1 is not listed on IDEAS
    14. Magazzino, Cosimo, 2011. "The nexus between public expenditure and inflation in the Mediterranean countries," MPRA Paper 28493, University Library of Munich, Germany.
    15. repec:eso:journl:v:47:y:2016:i:1:p:69-103 is not listed on IDEAS
    16. Funashima, Yoshito, 2015. "Wagner's law versus displacement effect," MPRA Paper 68390, University Library of Munich, Germany.
    17. repec:cup:jinsec:v:13:y:2017:i:03:p:575-598_00 is not listed on IDEAS
    18. repec:kap:itaxpf:v:24:y:2017:i:4:d:10.1007_s10797-017-9458-z is not listed on IDEAS
    19. Manabu Nose, 2017. "Estimation of drivers of public education expenditure: Baumol’s effect revisited," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(3), pages 512-535, June.
    20. Estéfano Rubio & Rodrigo Vergara, 2017. "Carga y estructura tributaria en Chile: comparación con países OCDE," Puntos de Referencia 451, Centro de Estudios Públicos.
    21. Pitlik, Hans & Rode, Martin, 2017. "Individualistic values, institutional trust, and interventionist attitudes," Journal of Institutional Economics, Cambridge University Press, vol. 13(03), pages 575-598, September.
    22. Magazzino, Cosimo, 2012. "Wagner versus Keynes: Public spending and national income in Italy," Journal of Policy Modeling, Elsevier, vol. 34(6), pages 890-905.
    23. Arze del Granado, F. Javier & Martinez-Vazquez, Jorge & McNab, Robert M., 2012. "Decentralized Governance and Preferences for Public Goods," MPRA Paper 42459, University Library of Munich, Germany.
    24. Nicholas Odhiambo, 2015. "Government Expenditure and Economic Growth in South Africa: an Empirical Investigation," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(3), pages 393-406, September.
    25. Magazzino, Cosimo, 2010. "Wagner's law and Italian disaggregated public spending: some empirical evidences," MPRA Paper 26662, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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