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Cointegration, causality and Wagner's Law in 19th century Europe

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  • John Thornton

Abstract

The long-run tendency for government expenditure to grow relative to GNP, Wagner's law, is tested for six European countries using data from around the mid-19th century to 1913. With few exceptions the results suggest that: nominal and real GNP, nominal and real government expenditure, and population were nonstationary in their levels but stationary in first differences; either nominal GNP and nominal government expenditure and/or real GNP and real government expenditure were cointegrated in five of the six countries, and that these variables were cointegrated with population in the remaining country; and Granger-causality was mainly unidirectional from income to government expenditure. Thus, there is considerable support for Wagner's law in 19th century Europe.

Suggested Citation

  • John Thornton, 1999. "Cointegration, causality and Wagner's Law in 19th century Europe," Applied Economics Letters, Taylor & Francis Journals, vol. 6(7), pages 413-416.
    • Handle: RePEc:taf:apeclt:v:6:y:1999:i:7:p:413-416
    DOI: 10.1080/135048599352916
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    References listed on IDEAS

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