Does The Relationship Between Government Expenditure And Economic Growth Follow Wagner’s Law In Nigeria?
While previous studies to test Wagner’s hypothesis for Nigeria used total government expenditure, this paper in addition to total government expenditure used a disaggregated government expenditure data from 1961 - 2007, specifically; expenditure on general administration and that of community and social services to determine the specific government expenditure that economic growth may have significant impact on. Economic conditions and policies change implying that it is not only economic growth that can affect government expenditure hence the inclusion of other fiscal policy variable and political freedom to augment the functional form of Wagner’s law. All the variables used were found to be I(1) and long run relationship exist between the dependent and the independent variables except in the case where only GDP was used as the independent variable. Wagner’s hypothesis does not hold in all the estimations rather Keynesian hypothesis was validated in all the estimation. Elasticity estimates and Granger causality results are in agreement.
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