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A logistic growth law for government expenditures: an explanatory analysis

  • Massimo Florio

    ()

  • Sara Colautti

Wagner's Law would imply an exponential growth process of the ratio between public expenditures and national income (G/Y). However the law may be rejected both on theoretical and empirical reasons, because it disregards the role of ever increasing distortionary taxation. But, under someconditions, the combination of Wagner's Law and the Pigou's conjecture that the excess burden oftaxation constraints the growth of public expenditures, may be captured by a non-linear first orderdifferential equation. The equation is the Verhulst's logistic, originally invented to model althusian predictions on population growth. The integration of a Verhulst equation generates a S-shaped curve and preliminary econometric estimates on very long run trends (around 1870-2000) of G/Y in US, UK, France, Germany, Italy, Sweden seem to confirm similar logistic trajectories, in spite of different individual parameters.

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Paper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 2001-13.

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Date of creation: 01 Jan 2001
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Handle: RePEc:mil:wpdepa:2001-13
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  1. Feldstein, Martin, 1997. "How Big Should Government Be?," Scholarly Articles 3043427, Harvard University Department of Economics.
  2. Ludger Schuknecht & Vito Tanzi, 1995. "The Growth of Government and the Reform of the State in Industrial Countries," IMF Working Papers 95/130, International Monetary Fund.
  3. Feldstein, Martin, 1997. "How Big Should Government Be?," National Tax Journal, National Tax Association, vol. 50(2), pages 197-213, June.
  4. Alan T. Peacock & Jack Wiseman, 1961. "The Growth of Public Expenditure in the United Kingdom," NBER Books, National Bureau of Economic Research, Inc, number peac61-1, October.
  5. Willi Leibfritz & John Thornton & Alexandra Bibbee, 1997. "Taxation and Economic Performance," OECD Economics Department Working Papers 176, OECD Publishing.
  6. A. Dale Tussing & John A. Henning, 1974. "Long-Run Growth of Nondefense Government Expenditures in the United States," Public Finance Review, , vol. 2(2), pages 202-222, April.
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