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Digging Into Economic Dynamics In South Sulawesi: Wagner’s Law To Keynes’ Hypothesis

In: Proceedings of the 9th International Conference on Accounting, Management, and Economics 2024 (ICAME 2024)

Author

Listed:
  • Indraswati Tri Abdi Reviane

    (Hasanuddin University)

  • Abdul Hamid Paddu

    (Hasanuddin University)

  • Nur Dwiana Sari Saudi

    (Hasanuddin University)

  • Fitriwati Djam’an

    (Hasanuddin University)

  • Mirzalina Zaenal

    (Hasanuddin University)

Abstract

The relationship between government expenditure and economic growth has been a subject of ongoing debate in economics, particularly in the context of regional development in Indonesia. This study aims to analyze the causal relationship between government spending and regional economic growth in South Sulawesi,Indonesia, taking into account two main views namely, Wagner’s Law and Keynes Hypothesis. Wagner’s Law states that increased government spending is a consequence of economic growth, while the Keynes Hypothesis argues that government spending can stimulate economic activity. The study employs panel data regression with Fixed Effect Model (FEM) and Granger causality test using annual data from 24 regencies/cities in South Sulawesi from 2010 to 2022. The FEM results indicate a significant positive relationship between government expenditure and economic growth. Moreover, the Granger causality test reveals bidirectional causality between government spending and economic growth. Thus, government spending in public policy should be done carefully, considering certain types of spending to achieve optimal economic growth. The findings suggest a complex, interdependent relationship between government expenditure and economic growth in South Sulawesi, highlighting the need for balanced and strategic fiscal policies.

Suggested Citation

  • Indraswati Tri Abdi Reviane & Abdul Hamid Paddu & Nur Dwiana Sari Saudi & Fitriwati Djam’an & Mirzalina Zaenal, 2025. "Digging Into Economic Dynamics In South Sulawesi: Wagner’s Law To Keynes’ Hypothesis," Advances in Economics, Business and Management Research, in: Mursalim Nohong & Fitra Roman Cahaya & Phung Minh Tuan & Arifuddin Mannan & Anas Iswanto Anwar & Ria (ed.), Proceedings of the 9th International Conference on Accounting, Management, and Economics 2024 (ICAME 2024), pages 1309-1320, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-758-8_106
    DOI: 10.2991/978-94-6463-758-8_106
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