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Explaining Government Spending: a Cointegration Approach

  • Abel Costa Fernandes

    ()

    (Faculdade de Economia, Universidade do Porto)

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    Based on a comprehensive theoretical model we investigate the determinants of government spending. Besides GDP, commonly associated with either Walra´s law or Keynesian macro stabilization policies, we consider some variables identified with the public choice approach, namely median voters, pressure groups and the ideology of the government in power. These other variables are women, elderly population and population occupied in agriculture. The model is tested empirically using Johansen´s cointegration technique for the cases of Australia and Canada with data on general government expenditure, thus covering all government sectors, including social security. For the most part, we find long-run relationships among the variables and with the expected signs.

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    File URL: http://www.fep.up.pt/investigacao/workingpapers/09.02.03_wp311.pdf
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    Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 311.

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    Length: 16 pages
    Date of creation: Feb 2009
    Date of revision:
    Handle: RePEc:por:fepwps:311
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    1. Cristina Santos & Alexandre Almeida & Aurora A.C. Teixeira, 2008. "Searching for clusters in tourism. A quantitative methodological proposal," FEP Working Papers 293, Universidade do Porto, Faculdade de Economia do Porto.
    2. Henrekson, Magnus, 1993. "Wagner's Law--A Spurious Relationship?," Public Finance = Finances publiques, , vol. 48(3), pages 406-15.
    3. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 407-43, May.
    4. Payne, James E & Ewing, Bradley T, 1996. "International Evidence on Wagner's Hypothesis: A Cointegration Analysis," Public Finance = Finances publiques, , vol. 51(2), pages 258-74.
    5. Niskanen, William A, 1975. "Bureaucrats and Politicians," Journal of Law and Economics, University of Chicago Press, vol. 18(3), pages 617-43, December.
    6. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-party System as a Repeated Game," Scholarly Articles 4552531, Harvard University Department of Economics.
    7. Nagarajan, P & Spears, A, 1990. "An Econometric Test of Wagner's Law for Mexico: A Re-examination," Public Finance = Finances publiques, , vol. 45(1), pages 165-68.
    8. Ana Paula Ribeiro, 2009. "Interactions between Labor Market Reforms and Monetary Policy under Slowly Changing Habits," FEP Working Papers 309, Universidade do Porto, Faculdade de Economia do Porto.
    9. Bird, Richard M, 1971. "Wagner's o Law' of Expanding State Activity," Public Finance = Finances publiques, , vol. 26(1), pages 1-26.
    10. Maria Manuel Pinho, 2008. "The political economy of public spending composition: evidence from a panel of OECD countries," FEP Working Papers 295, Universidade do Porto, Faculdade de Economia do Porto.
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