A validation of Wagner's Law: a case study of Sri Lanka

This study examines whether there is empirical evidence that Wagner's law holds in the Sri Lankan economy using time series annual data over the period from 1960 to 2010 for Sri Lanka, applying cointegration and error correction modeling (ECM) techniques. In particular, this study keeps a special focus to examine the validity of six versions of Wagner's hypothesis, which support the existence of long-run relationship between public expenditure and economic growth. The empirical evidence of this study indicates that while there prevail is a short-run relationship between public expenditure and economic growth, the long-run results showed no strong evidence in support of the validity of the Wagner’s law for Sri Lankan economy. Granger causality analysis also confirms this result. Therefore, the findings of this study pave to broaden this study further for a deeper understanding about the relationship between public expenditure and economic growth by giving more attention on individual items of public expenditure and by including more macroeconomic variables in the econometric model using different methodology in future.

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An Empirical Analysis of the Validity of Wagner’s Law in China A Case Study Based on Gibbs Sampler

International Journal of Business and Management ◽

10.5539/ijbm.v5n6p161 ◽

2010 ◽

Vol 5 (6) ◽

Cited By ~ 2

Author(s):

Yan Zheng ◽

Jiabai Li ◽

Xiao-Li Wang ◽

Changqing Li

Keyword(s):

Empirical Analysis ◽

Gibbs Sampler ◽

Wagner’S Law ◽

Wagner's Law

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THE RELATIONSHIP BETWEEN ECONOMIC GROWTH AND GOVERNMENT SPENDING: A CASE STUDY OF OIC COUNTRIES

Jurnal Ekonomi Pembangunan Kajian Masalah Ekonomi dan Pembangunan ◽

10.23917/jep.v11i2.322 ◽

2015 ◽

Vol 11 (2) ◽

pp. 149 ◽

Cited By ~ 1

Author(s):

Heri Sudarsono

Keyword(s):

Economic Growth ◽

Government Spending ◽

Time Series Data ◽

Series Data ◽

Causality Test ◽

Wagner’S Law ◽

The Public ◽

Wagner's Law ◽

The Relationship

This paper presents the results for testing for causal relationship between economic growth and goverment spending for OIC countries covering the time series data 1970~2006. There are usually two propositions regarding the relation between economic growth and government spending: Wagner’s Law states that as GDP grows, the public sector tends to grow; and the Keynesian framework postulates that public expenditure causes GDP to grow. The primary strength and originality of this paper is that we used aggregate data as well as disaggregate data for Granger causality test. By testing for causality between economic growth and government spending, we find that government spending does cause economic growth in Iran, Nigeria and Tunisia, which are compatible with Keynesian’s theory. However, the economic growth does cause the increase in goverment spending in Algeria, Burkina Faso, Benin, Indonesia, Libya Malaysia, Marocco, and Saudi, which are well-suited with Wagner’s law.

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