His idea is also known as wagner s growth of public expenditure. With the use of annual time series data from 197071 to 2014, all the six versions of wagner s law have been analyzed to test the relationship between government expenditure and gross domestic product. Wagner s law is named after the german political economist adolph wagner 18351917, who developed a law of increasing state activity after empirical analysis on western europe at the end of the 19th century. He published his book titled law of the increase of state activities. Article information, pdf download for wagners law, public sector patterns, and.
An examination of the relevant articles reveals ignorance both of wagner s definition of state activity and of his insistence that he was not engaged in prediction. Wagners law investigated that fundamental economic growth is validity to the. The aim of this article is to assess its empirical evidence in italy for the period 19602008 at a disaggregated level, using a timeseries approach. It has generally been believed that the share of government expenditure in gnp tends to rise along with gnp per capita.
Conflicting empirical findings of various crosssection studies of wagner s law of public expenditures are examined. The public expending is one of the main factors to increase the expense of the private costs. Wagners law of increasing state activity, peacockwiseman. The effectiveness and efficiency of public spending european. A formulation of wagner s law, mentioned by bird 1971 is as follows. Wagner s law, known as the law of increasing state spending, is a principle named after the german economist adolph wagner 18351917.
Waec gce past questions and answers free download pdf all subjects these are. Musgrave and musgrave 1988 opined that as progressive nations. Of course, a positive relationship would imply a similar development in the asset side of the public balance sheet and an the strict law would lead to an implausible explosive path for the share of public spending over gdp. An overview of public expenditure management this chapter has two objectives. Wagner s law and public expenditure growth in kuwait. Managing public expenditure a reference book for transition countries.
Our longrun analysisshows a permanent influence of domestic product on the growthof governments, supporting wagner s law. In his hypothesis, he analyzes the relationship between public expenditure and growth of an economy. In the previous studies have been tested the six versions of wagner s law to support the existence of longrun relationship between government. In the tradition of wagner s law, this study examines the relationship between aggregate income and public expenditures in greece and portugal during the years 195885. Review of theories on government expenditure economics essay. This paper investigates the keynesian view and the wagner s law on the role of public expenditure on economic growth for malaysia 19702004. The study uses the recently developed autoregressive distributed lag model ardlbounds testing approach to examine this linkage. We analyze the displacement effect within a multivariaterevenue expenditure model of government growth, based on along historical dataset, for italy. Thinkers said government should stay with their traditional functions of spending on defence and maintaining law and order.
This paper examines the empirical analysis of the two main hypotheses subsumed under wagner s law. Adolf wagner introduced his hypothesis with connecting to the public expenditure. This web site will be regularly updated and it is intended to make it publicly available in the near future. Abstractthe present study empirically analyzes the validity of wagner s law for indian economy. Testing for structural changes in the wagners law for a. Issueproblem to enable a studentcitizen perspective of the national budget in its specific programs such as exhb. After a brief introduction, a survey of the economic literature on this issue is shown, before estimating the specifications of wagner s law for some. Public expenditure is spending made by the government of a country on collective needs and. The shortrundynamics are more complex and provide some evidence for thedisplacement effect, in terms of a. Theories of public expenditures wagners law and peacock. Wagners law, that is, public expenditures outpacing economic growth. He first observed it for his own country and then for other countries.
Wagners law, known as the law of increasing state spending, is a principle named after the german economist adolph wagner 18351917. The curious attraction of wagners law springerlink. The so called law of increasing state activity maintained that there is both and absolute and a relative expansion of the public sector including central and local governments bodies and public enterprises, at the cost of the growth in the private sector wagner, 1911. This study examined the causal relationship between government spending and national income in panel of three african countries nigeria, ghana and south africa during the period 1970 to 2012 using johansen fisher panel cointegration test and then on a countrybycountry basis using time series johansenjuselius cointegration techniques. Wagners law, public sector patterns, and growth of public. The findings provide useful information for policy makers that can help broaden their understanding of the relationship between government spending and national income, which could aid. The budget as approved by the legislature for a line item of spending. Among the different nonparametric methods the free disposal hull fdh. The theory holds that for any country, that public expenditure rises constantly. Adolf wagner 1883 realized the positive relationship between public spending and rates of economic growth based on diachronical tendency. A critical appraisal of the theories of government. In the field of public finances, the issue of potential links between government revenue and. The study finds no empirical support for wagner s law, with and without population structure taken into account. A time series and panel analysis of government spending.
Wagners law suggests that a welfare state evolves from free market. Restructuring society and wagner s law version two. One set of studies has explored the principal causes of growth in the public sector. Wagner s law of increasing state activity has recently been subjected to intensive use of recondite econometric testing procedures. Consequently, the omission of public enterprises contained in wagner s definition leads. Wagner s law is the fi rst model of public expenditure in the history of public fi nance. Our goal in this paper is to explore the validity of wagner s law in saudi arabia during the period 19702012 for real oil gdp and nonoil gdp. Download fulltext pdf download fulltext pdf the wagner s law of expanding public sector. Empirical evidence based on public expenditure patterns over a 24year.
In order to address the omission of variable bias, the study incorporates. In this paper, the validity of the wagner s law is investigated in tenth selected sub saharan african countries, namely botswana, equatorial guinea, mauritania, nigeria, south africa, sierra leone, tanzania, ethiopia, madagascar, and dr congo. Government expenditure and economic growth in the eu longrun. In simple terms, wagner s law states that the government sector has a. Government expenditure, wagner s law, panel co integration.
Home economics an evaluation of wagner s law on public expenditure and economic growth in nigeria 1980 2011 an evaluation of wagner s law on public expenditure and economic growth in nigeria 1980 2011 economics department of economics. On the other hand, wagner argues that expenditure is an endogenous factor or an outcome, not a cause, of growth in national income. This paper empirically examines the wagner s law of expanding public sector using a long annual time series data for the u. Wagner s hypothesis or wagner s law highlight that public expenditure is an endogenous factor that is driven by the growth of national income.
Unlike more conventional specifications, our analysis focuses on the movement of different componenets of public. United nations commission on international trade law. Empirical evidence based on public expenditure patterns over a 24year period casts doubt on the existence of wagner s law, the displacement effect, and budgetary recentralization in taiwan, while supporting the beck hypothesis of declining real public sector size, the concentration effect, and decentralized centralization. Wagner s law is the first model of public spending in the history of public finance. Government expenditure and economic growth in south africa. We cover the period from 1970 to 20 and use econometric tools like autoregressive distributed lag model ardl test to check the longrun and causal relationship. The law predicts that the development of an industrial economy will be accompanied by an increased share of public expenditure in gross national product. While both predominantly focus on the demandside, they differ with respect to their. The budget law gives the executive branch the authority to incur obligations, which become.
In the paper we do not investigate the implication of wagner s law about the sustainability of growing public expenditure. Wagner s law is a principle named after the german economist aldolph wagner 18351917. Wagner s law, the proposition that there is a longrun tendency for the public sector to grow relative to national income, has become a stylized fact in public finance. Government expenditure and economic growth in the eu long. Wagner law of increasing state activity public expenditure. As is true of existing studies on other developing countries, higher. The analysis is an advance over previous work in several ways. Incomeelastic demand have received considerable attention in the literature, although the latter version somewhat more than the former. This paper exists in english only and can be downloaded from the website.
Wagner s law the law of increasing expansion of public and particularly state activities wagner, 1893 is one of the earliest attempts that emphasises economic growth as the fundamental determinant of public. Government expenditure, wagners law, panel co integration. The empirical results using the autoregression distributed lag ardl model and the bounds test pesaran et al. Expenditure such as interest payments, expenditure on law and order, public administration. Download limit exceeded you have exceeded your daily download allowance. This paper examines the wagner s law for a sample of east asian countries china, hong kong, japan and south korea by utilizing the structural break methods viz. Wagner s law investigated that fundamental economic growth is validity to the public sector growth. Investigating the keynesian view and wagners law on the. Testing the validity of wagner s law in bolivia abstract nine versions of wagner s law are examined employing annual timeseries data on bolivia for the period 19402010. This article throws light upon the top three theories for the analysis of public expenditure growth. This study explores the relationship between public expenditure pe and gross domestic product gdp to verify whether the wagners hypothesis holds good in the indian context. Following keynes, public expenditure is seen as an exogenous factor to be used as a policy instrument to influence growth.
Wagner s law states that the economic growth is the causative factor of the growth. These results appear to undermine wagner s law with aggregate data for the study period. Thus, the causality according to wagner s law runs from economic growth to government spending. Subsaharan african countries public expenditure and. Wagner s law of increasing state activity, peacockwiseman hypothesis content writer. Adolf wagner a noted german political economist 18351917 propounded an empirical law to analyses and explains the trend in the growth of public expenditure. Wagner s law, which states an existing relationship between the growth of an industrializing economy and the simultaneous faster growth of the public sector and the government herber 1979. Wagners law and italian disaggregated public spending. Keynes and wagner on government expenditures and economic.
The empirical evidence provides indication of a structural positive correlation between public spending and per. In contrast, keynesian hypothesis emphasizes that economic growth occurs as a result of rising public expenditure and is considered as an independent exogenous variable to influence the economic growth. The public expenditure income hypothesis has long been debated in economics. First, the hypothesis of a longrun relationship between different types. Data sources and methodology the data for this paper is obtained from rbi website from 197071 to 200910 for gdp and public expenditure. Five variants of the wagner s law were tested for the period 20052014, using panel econometric approaches encompassing cointegration and causality. It suggests that during the process of economic development the share of public spending in national. The theory holds that for any country, that public expenditure rises. Testing wagners law using disaggregated public expenditure data in the case of. Government expenditure and economic growth in the eu. Downloading the fiscal deficit should not be permitted defining fiscal targets for general.
First, it places public expenditure management pem in the broader context of the role of the state, good governance, macroeconomic policy, and the changing environment especially in information and communication technology. Almussallam 1998, public expenditure growth in kuwait. Pdf wagners law and public expenditure growth in kuwait. In this study, the dynamic causal relationship between government expenditure and economic growth is examined using data from south africa, the most advanced economy in africa.
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