IDEAS home Printed from https://ideas.repec.org/a/eme/jespps/v38y2011i4p398-413.html
   My bibliography  Save this article

A re-examination of Wagner's Law using US total state and local expenditure and its sub-categories

Author

Listed:
  • Saeid Mahdavi

Abstract

Purpose - This paper seeks to examine the validity of Wagner's Law using annual data (1957-2006) for the US state-local government (SLG) real expenditure and eight of its sub-categories. Design/methodology/approach - The co-integration tests of Johansen and the bounds testing approach to co-integration proposed by Pesaran Findings - Most SLG expenditure variables were found to be non-stationary and income-elastic. However, with the exception of total expenditure (te), insurance trust benefits (ins) and social services and income maintenance (ssim), no other non-stationary expenditure variable was co-integrated with pcgdp and error-corrected over time. The ECM results suggested that te, ins and ssim were driven by pcgdp, consistent with a Wagnerian causal ordering. The Toda-Yamamoto approach, however, indicated that in these and a few other cases the causal effect was bidirectional. Originality/value - This paper provides a fairly comprehensive test of Wagner's Law at the US sub-national government level with an emphasis on the concepts of co-integration and (long-run) causality in the income-expenditure nexus. Its findings underscore the importance of using disaggregated expenditure measures to test Wagner's Law, as they suggest that some, but not all, rapidly growing and non-stationary expenditure sub-categories were decoupled from pcgdp in the long run.

Suggested Citation

  • Saeid Mahdavi, 2011. "A re-examination of Wagner's Law using US total state and local expenditure and its sub-categories," Journal of Economic Studies, Emerald Group Publishing, vol. 38(4), pages 398-413, September.
  • Handle: RePEc:eme:jespps:v:38:y:2011:i:4:p:398-413
    as

    Download full text from publisher

    File URL: http://www.emeraldinsight.com/10.1108/01443581111160860?utm_campaign=RePEc&WT.mc_id=RePEc
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. T.K. Jayaraman & Baljeet Singh, 2007. "Foreign Direct Investment and Employment Creation in Pacific Island Countries: An Empirical Study of Fiji," Working Papers 3507, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
    2. Greenhalgh, Christine & Gregory, Mary, 2001. " Structural Change and the Emergence of the New Service Economy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(0), pages 629-646, Special I.
    3. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    4. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, pages 199-211.
    5. Guerrieri, Paolo & Meliciani, Valentina, 2005. "Technology and international competitiveness: The interdependence between manufacturing and producer services," Structural Change and Economic Dynamics, Elsevier, vol. 16(4), pages 489-502, December.
    6. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, pages 139-162.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jespps:v:38:y:2011:i:4:p:398-413. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman). General contact details of provider: http://www.emeraldinsight.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.