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A logistic growth law for government expenditures: an explanatory analysis

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  • Massimo Florio
  • Sara Colautti

Abstract

Wagner's Law would imply an exponential growth process of the ratio between public expenditures and national income (G/Y). However the law may be rejected both on theoretical and empirical reasons, because it disregards the role of ever increasing distortionary taxation. But, under someconditions, the combination of Wagner's Law and the Pigou's conjecture that the excess burden oftaxation constraints the growth of public expenditures, may be captured by a non-linear first orderdifferential equation. The equation is the Verhulst's logistic, originally invented to model althusian predictions on population growth. The integration of a Verhulst equation generates a S-shaped curve and preliminary econometric estimates on very long run trends (around 1870-2000) of G/Y in US, UK, France, Germany, Italy, Sweden seem to confirm similar logistic trajectories, in spite of different individual parameters.

Suggested Citation

  • Massimo Florio & Sara Colautti, 2001. "A logistic growth law for government expenditures: an explanatory analysis," Departmental Working Papers 2001-13, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    • Handle: RePEc:mil:wpdepa:2001-13
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    References listed on IDEAS

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    Cited by:

    1. Cosimo Magazzino, 2012. "The Nexus between Disaggregated Public Spending and GDP in the Euro Area," Economics Bulletin, AccessEcon, vol. 32(3), pages 2560-2579.
    2. Magazzino, Cosimo, 2011. "The nexus between public expenditure and inflation in the Mediterranean countries," MPRA Paper 28493, University Library of Munich, Germany.
    3. Magazzino, Cosimo, 2012. "Wagner versus Keynes: Public spending and national income in Italy," Journal of Policy Modeling, Elsevier, vol. 34(6), pages 890-905.
    4. Magazzino, Cosimo, 2010. "Wagner's law and Italian disaggregated public spending: some empirical evidences," MPRA Paper 26662, University Library of Munich, Germany.

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