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The Demand for Current Public Expenditure in Fiji: Theory and Empirical Results

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  • Doessel, Darrel
  • Valadkhani, Abbas

Abstract

This paper analyses current government expenditure in Fiji using annual time series data for the period 1969-1999. Alternative theories of government expenditure are reviewed and a distinction is made between economic/apolitical determinants and institutional/political determinants. Categorising the literature in this way suggests the application of non-nested tests in empirical work, which is reported elsewhere. All non-nested tests lead to the conclusion of double rejection. Therefore, a parsimonious comprehensive model, encompassing both economic and institutional variables, is preferred as it passes all diagnostic tests and exhibits no sign of misspecification. The Engle-Granger two-step procedure has been applied to analyse both long- and short-run determinants of public expenditure. The paper presents the first empirical estimates of the own-price elasticity of demand and income elasticity of demand for current public expenditure in Fiji.

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File URL: https://mpra.ub.uni-muenchen.de/50392/1/MPRA_paper_50392.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 50392.

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Date of creation: 2003
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Publication status: Published in Pacific Economic Bulletin 1.18(2003): pp. 54-66
Handle: RePEc:pra:mprapa:50392
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Keywords: Fiji; Government public expenditures;

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Find related papers by JEL classification:
  • H4 - Public Economics - - Publicly Provided Goods
  • H5 - Public Economics - - National Government Expenditures and Related Policies

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  1. Wagner, Richard E & Weber, Warren E, 1975. "Competition, Monopoly, and the Organization of Government in Metropolitan Areas," Journal of Law and Economics, University of Chicago Press, vol. 18(3), pages 661-84, December.
  2. Kenneth Rogoff, 1987. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
  3. William D. Nordhaus, 1975. "The Political Business Cycle," Review of Economic Studies, Oxford University Press, vol. 42(2), pages 169-190.
  4. Gemmell, Norman, 1990. "Wagner's Law, Relative Prices and the Size of the Public Sector," The Manchester School of Economic & Social Studies, University of Manchester, vol. 58(4), pages 361-77, December.
  5. Pesaran, H., 1995. "Planning and Macroeconomic Stabilization in Iran," Cambridge Working Papers in Economics 9508, Faculty of Economics, University of Cambridge.
  6. Bergstrom, Theodore C & Goodman, Robert P, 1973. "Private Demands for Public Goods," American Economic Review, American Economic Association, vol. 63(3), pages 280-96, June.
  7. Marlow, Michael L & Orzechowski, William, 1996. "Public Sector Unions and Public Spending," Public Choice, Springer, vol. 89(1-2), pages 1-16, October.
  8. Abbas Valadkhani, 1998. "Effect of government capital expenditure on GDP in the Iranian economy using superexogeneity testing," Applied Economics Letters, Taylor & Francis Journals, vol. 5(6), pages 361-364.
  9. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  10. Borcherding, Thomas E & Deacon, Robert T, 1972. "The Demand for the Services of Non-Federal Governments," American Economic Review, American Economic Association, vol. 62(5), pages 891-901, December.
  11. Pesaran, M H & Deaton, Angus S, 1978. "Testing Non-Nested Nonlinear Regression Models," Econometrica, Econometric Society, vol. 46(3), pages 677-94, May.
  12. Azmat Gani, 1998. "Some empirical evidence on the determinants of immigration from Fiji to New Zealand: 1970-94," New Zealand Economic Papers, Taylor & Francis Journals, vol. 32(1), pages 57-69.
  13. Valadkhani, Abbas, 2001. "An Analysis of Iran’s Third Five-Year Development Plan in the Post-Revolution Era (2000-2005)," MPRA Paper 50386, University Library of Munich, Germany.
  14. Dennis Mueller & Peter Murrell, 1986. "Interest groups and the size of government," Public Choice, Springer, vol. 48(2), pages 125-145, January.
  15. Stigler, George J, 1970. "Director's Law of Public Income Redistribution," Journal of Law and Economics, University of Chicago Press, vol. 13(1), pages 1-10, April.
  16. Buchanan, James M. & Wagner, Richard E., 1978. "Dialogues concerning fiscal religion," Journal of Monetary Economics, Elsevier, vol. 4(3), pages 627-636, August.
  17. Borcherding, Thomas E., 1985. "The causes of government expenditure growth: A survey of the U.S. evidence," Journal of Public Economics, Elsevier, vol. 28(3), pages 359-382, December.
  18. D.P. Doessel & Abbas Valadkhani, 2002. "Public Finance and The Size of Government: A Literature Review and Econometric Results for Fiji," School of Economics and Finance Discussion Papers and Working Papers Series 108, School of Economics and Finance, Queensland University of Technology.
  19. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135.
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