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Wagner's Law, Relative Prices and the Size of the Public Sector

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  • Gemmell, Norman

Abstract

This paper examines the effects on the size of the government sector of changes in per capita income, population and relative output prices, using a recently revised internationally comparable data set for 117 countries. The main hypotheses considered are (1) does Wagner's 'law' hold? ( b) does government output respond to price changes? (c) does government produce mainly 'pure' private or public goods? Cross-section and time-series evidence suggests (i) almost no support for Wagner's 'law'; (ii) relative prices are important for government output; and (iii) the hypothesis that governments produce pure private goods is generally accepted. These results differ from most previous studies which have ignored relative price effects and constrained income and population elasticities. Copyright 1990 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • 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 361-377, December.
    • Handle: RePEc:bla:manch2:v:58:y:1990:i:4:p:361-77
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    Cited by:

    1. Doessel, Darrel & Valadkhani, Abbas, 2003. "The Demand for Current Public Expenditure in Fiji: Theory and Empirical Results," MPRA Paper 50391, University Library of Munich, Germany.
    2. Gemmell, Norman & Morrissey, Oliver & Pinar, Abuzer, 1999. "Fiscal illusion and the demand for government expenditures in the UK," European Journal of Political Economy, Elsevier, vol. 15(4), pages 687-704, November.
    3. Manuel Jaen-Garcia, 2011. "Empirical Analysis of Wagner’s Law for the Spain’s Regions," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 1(1), pages 1-17, November.
    4. Steven Gordon & John Garen & J. R. Clark, 2019. "The growth of government, trust in government, and evidence on their coevolution," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(3), pages 456-480, July.
    5. Tridimas, George & Winer, Stanley L., 2005. "The political economy of government size," European Journal of Political Economy, Elsevier, vol. 21(3), pages 643-666, September.
    6. Ettah Bassey ESSIEN, 2016. "Population Growth and Economic Growth Performance in Nigeria (1981 – 2014)," Turkish Economic Review, KSP Journals, vol. 3(1), pages 143-159, March.
    7. Fabio Tramontana & Laura Gardini, 2021. "Revisiting Samuelson’s models, linear and nonlinear, stability conditions and oscillating dynamics," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 10(1), pages 1-15, December.
    8. Paul R. Blackley, 2003. "Price versus Income Effects as Sources of Growth in Government's Share of GDP," Public Finance Review, , vol. 31(3), pages 241-262, May.
    9. George Tridimas & Stanley L. Winer, 2004. "A Contribution to the Political Economy of Government Size: 'Demand', 'Supply' and 'Political Influence'," Carleton Economic Papers 04-04, Carleton University, Department of Economics.
    10. 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.
    11. Burak Sencer Atasoy & Timur Han Gür, 2016. "Does the Wagner’s Hypothesis Hold for China? Evidence from Static and Dynamic Analyses," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 63(1), pages 45-60, March.
    12. Gabriella Legrenzi & Costas Milas, 2002. "The Role of Omitted Variables in Identifying a Long-run Equilibrium Relationship for the Italian Government Growth," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(4), pages 435-449, August.
    13. Ibrahim Muhammad Muye & Rayyan Abdulkareem Kaita & Ahmad Fahmi Sheikh Hassan, 2017. "Debt and Economic Growth in an Oil Rich Economy: Evidence from Saudi Arabia," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 70-75.

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