This paper re-examines Wagner's law of an expanding government sector with progress of the economy for China. This study divides the sample into two periods: "pre-reform" (1960)(1961)(1962)(1963)(1964)(1965)(1966)(1967)(1968)(1969)(1970)(1971)(1972)(1973)(1974)(1975)(1976)(1977)(1978) and "post-reform" . The empirical results indicate that a long-run relationship between national income and public spending does exist in the "pre-reform" and "post-reform" period. The results show that unidirectional Granger causality from national income to public spending is found in the "post-reform" period, thus providing support for Wagner's law. Alternatively, no causal relationship between public spending and national income is found in the "pre-reform" period, thus lending no support to the validity of Wagner's law.
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