Increasing Public Expenditures: Wagner’s Law in OECD Countries

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Increasing Public Expenditures: Wagner’s Law in OECD Countries

Author Info

Serena Lamartina (European Central Bank)
Andrea Zaghini () (Banca d’Italia & Center for Financial Studies, Frankfurt)

Additional information is available for the following registered author(s):

Andrea Zaghini

Abstract

The paper proposes a panel cointegration analysis of the joint development of government expenditures and economic growth in 23 OECD countries. The empirical evidence provides indication of a structural positive correlation between public spending and per-capita GDP which is consistent with the so-called Wagner’s law. A long-run elasticity larger than one suggests a more than proportional increase of government expenditures with respect to economic activity. In addition, according to the spirit of the law, we found that the correlation is usually higher in countries with lower per-capita GDP, suggesting that the catching-up period is characterized by a stronger development of government activities with respect to economies in a more advanced state of development.

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Paper provided by Center for Financial Studies in its series CFS Working Paper Series with number 2008/13.

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Length: 25 pages
Date of creation: Apr 2008
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Handle: RePEc:cfs:cfswop:wp200813

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Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-04-29 (All new papers)
NEP-MAC-2008-04-29 (Macroeconomics)
NEP-PBE-2008-04-29 (Public Economics)
NEP-PKE-2008-04-29 (Post Keynesian Economics)

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