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Government Expenditures In China And Taiwan: Do They Follow Wagner¡¯S Law?

  • Chiung-Ju Huang

    ()

    (Department of Public Finance, Feng Chia University)

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    This paper tests Wagner¡¯s Law for China and Taiwan, using annual time series data covering the period 1979-2002. To estimate the long-run relationship between government expenditures and output, we use a robust estimation method known as the Bounds Test based on Unrestricted Error Correction Model (UECM) estimation (Pesaran et al. (2001)). Empirical results from the Bounds Test indicate that there exists no long-run relationship between government expenditures and output in China and Taiwan. Furthermore, Toda and Yamamoto¡¯s (1995) Granger non-causality test results also show that Wagner¡¯s Law does not hold for China and Taiwan over this same period.

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    Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

    Volume (Year): 31 (2006)
    Issue (Month): 2 (December)
    Pages: 139-148

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    Handle: RePEc:jed:journl:v:31:y:2006:i:2:p:139-148
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    1. Zapata, Hector O & Rambaldi, Alicia N, 1997. "Monte Carlo Evidence on Cointegration and Causation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(2), pages 285-98, May.
    2. Panayiotis C. Afxentiou & Apostolos Serletis, 1991. "A Time-Series Analysis of the Relationship Between Government Expenditure and Gdp in Canada," Public Finance Review, , vol. 19(3), pages 316-333, July.
    3. Abizadeh, Sohrab & Yousefi, Mahmood, 1988. "An empirical re-examination of Wagner's law," Economics Letters, Elsevier, vol. 26(2), pages 169-173.
    4. Tsangyao Chang, 2002. "An econometric test of Wagner's law for six countries based on cointegration and error-correction modelling techniques," Applied Economics, Taylor & Francis Journals, vol. 34(9), pages 1157-1169.
    5. Henrekson, Magnus, 1993. "Wagner's Law--A Spurious Relationship?," Public Finance = Finances publiques, , vol. 48(3), pages 406-15.
    6. Anisul Islam, 2001. "Wagner's law revisited: cointegration and exogeneity tests for the USA," Applied Economics Letters, Taylor & Francis Journals, vol. 8(8), pages 509-515.
    7. Michael Chletsos & Christos Kollias, 1997. "Testing Wagner's law using disaggregated public expenditure data in the case of Greece: 1958-93," Applied Economics, Taylor & Francis Journals, vol. 29(3), pages 371-377.
    8. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
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