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Further Evidence on Public Spending and Economic Growth in East Asian Countries

  • Kumar, Saten
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    This article examines Wagner’s Law for East Asian countries (China, Hong Kong, Japan, Taiwan and South Korea) for the period 1960 to 2007. Using the Gregory and Hansen (1996a & b) structural break techniques, we find a cointegrating relationship between real government spending and real income. Our preferred Gregory and Hansen models are with the level shift for Hong Kong and Taiwan and regime shift (change in intercept and slope coefficients) for China, Japan and South Korea. The income elasticity of government spending ranges from 0.756 to 1.155. With these findings, we infer that Wagner’s Law does hold for these countries, except for Hong Kong where the income elasticity is not highly statistically significant.

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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19298.

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    Date of creation: 20 Oct 2009
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    Handle: RePEc:pra:mprapa:19298
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    1. Sinha, Dipendra, 2007. "Does the Wagner’s Law hold for Thailand? A Time Series Study," MPRA Paper 2560, University Library of Munich, Germany.
    2. Ying-Foon Chow & John Cotsomitis & Andy Kwan, 2002. "Multivariate cointegration and causality tests of Wagner's hypothesis: evidence from the UK," Applied Economics, Taylor & Francis Journals, vol. 34(13), pages 1671-1677.
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    7. Warwick J McKibbin & Will Martin, 1998. "The East Asian Crisis: Investigating Causes and Policy Responses," Departmental Working Papers 1998-06, The Australian National University, Arndt-Corden Department of Economics.
    8. Anisul Islam, 2001. "Wagner's law revisited: cointegration and exogeneity tests for the USA," Applied Economics Letters, Taylor & Francis Journals, vol. 8(8), pages 509-515.
    9. 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, December.
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    11. Bharat Kolluri & Michael Panik & Mahmoud Wahab, 2000. "Government expenditure and economic growth: evidence from G7 countries," Applied Economics, Taylor & Francis Journals, vol. 32(8), pages 1059-1068.
    12. Paresh Kumar Narayan & Ingrid Nielsen & Russell Smyth, 2006. "Panel Data, Cointegration, Causality And Wagner'S Law: Empirical Evidence From Chinese Provinces," Monash Economics Working Papers 01/06, Monash University, Department of Economics.
    13. M. I. Ansari & D. V. Gordon & C. Akuamoah, 1997. "Keynes versus Wagner: public expenditure and national income for three African countries," Applied Economics, Taylor & Francis Journals, vol. 29(4), pages 543-550.
    14. Gregory, A.W. & Hansen, B.E., 1992. "Residual-Based Tests for Cointegration in Models with Regime Shifts," RCER Working Papers 335, University of Rochester - Center for Economic Research (RCER).
    15. Chiung-Ju Huang, 2006. "Government Expenditures In China And Taiwan: Do They Follow Wagner¡¯S Law?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 31(2), pages 139-148, December.
    16. Peacock, Alan & Scott, Alex, 2000. " The Curious Attraction of Wagner's Law," Public Choice, Springer, vol. 102(1-2), pages 1-17, January.
    17. Tsangyao Chang & WenRong Liu & Steven Caudill, 2004. "A re-examination of Wagner's law for ten countries based on cointegration and error-correction modelling techniques," Applied Financial Economics, Taylor & Francis Journals, vol. 14(8), pages 577-589.
    18. Dimitrios Sideris, 2007. "Wagner's Law in 19th Century Greece: A Cointegration and Causality Analysis," Working Papers 64, Bank of Greece.
    19. Bağdigen, Muhlis & Çetintaş, Hakan, 2003. "Causality between Public Expenditure and Economic Growth: The Turkish Case," MPRA Paper 8576, University Library of Munich, Germany, revised 07 Dec 2003.
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