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Wagner's hypothesis: a local perspective

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  • Randall W. Eberts
  • Timothy J. Gronberg

Abstract

Wagner's hypothesis of an expanding public sector as an economy develops is tested using pooled time-series cross-sectional data for U.S. states from 1964 to 1986. Comparing government size among fiscal jurisdictions within a single nation reduces the problems of data comparability and of controlling for cultural and institutional differences that plague the more common international tests of this theory. Our results are inconsistent with Wagner's hypothesis, yielding a negative relationship between public-sector size and output. However, some empirical support is found in the protective services and public welfare components of government activity.

Suggested Citation

  • Randall W. Eberts & Timothy J. Gronberg, 1992. "Wagner's hypothesis: a local perspective," Working Papers (Old Series) 9202, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwp:9202
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    References listed on IDEAS

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    3. Peltzman, Sam, 1980. "The Growth of Government," Journal of Law and Economics, University of Chicago Press, vol. 23(2), pages 209-287, October.
    4. Bird, Richard M, 1971. "Wagner's o Law' of Expanding State Activity," Public Finance = Finances publiques, , vol. 26(1), pages 1-26.
    5. Peltzman, Sam, 1980. "The Growth of Government," Working Papers 1, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    6. John Joseph Wallis & Wallace E. Oates, 1988. "Does Economic Sclerosis Set in with Age? An Empirical Study of the Olson Hypothesis," Kyklos, Wiley Blackwell, vol. 41(3), pages 397-417, August.
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    Cited by:

    1. Albert Alesina & Stephan Danninger & Massimo Rostagno, 2001. "Redistribution Through Public Employment: The Case of Italy," IMF Staff Papers, Palgrave Macmillan, vol. 48(3), pages 1-2.

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    Keywords

    Expenditures; Public;

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