Economic Development and Government Spending:  An Exploration of Wagner’s Hypothesis during Fifty Years  of Growth in East Asia

Mohammadi, Hassan; Ram, Rati

doi:10.3390/economies3040150

Cited by 7 publications

(6 citation statements)

References 23 publications

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“…Only trade has negative significant impact on GDP. The findings are parallel with previous empirical studies of Ayinde et al (2015) and Mohammadi and Ram (2015).…”

Section: Measurementsupporting

confidence: 88%

The Impact of Government Expenditures, Gross Capital Formation, Trade, and Portfolio Investment on the Economic Growth of Asean Economies

Jermsittiparsert¹,

Saengchai²,

Boonrattanakittibhumi³

et al. 2019

JSSI

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This paper examines the impact of public spending on ASEAN-5 countries economic development. The purpose of this study is to provide evidence, reference and contribute to the knowledge about government spending and economic growth. This study involves ASEAN-5 countries. The countries are Thailand, Singapore, Indonesia, Philippines and Malaysia. The countries are chosen because there is a lack of study of government expenditure for ASEAN-5 countries using panel data. The data covers from year 1990 to 2014. The data is retrieved from the World Development Indicators (World Bank). The dependent variable is gross domestic product (GDP). GDP is used to measure economic growth. The main independent variable is government expenditure. The other independent variables are gross capital formation, portfolio investment, labor, trade, total reserve and gross savings. A clear understanding about inter-linkages between government spending and economic growth will help the government in making better decision for the country. As ASEAN countries have responsibility for ASEAN Economic Community (AEC) Blueprint 2025 to meet its objectives, ASEAN governments are expected to effectively monitor the public spending as fiscal instrument in stimulating economic growth. Government expenditure may become unproductive if misallocating and using it in excess. From this study, there is evidence that government expenditure has impact on economic growth. Future research is expected to expand the investigation to other composition of government spending such as education, defense and infrastructure expenditures instead of using general government final consumption expenditures.

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“…Only trade has negative significant impact on GDP. The findings are parallel with previous empirical studies of Ayinde et al (2015) and Mohammadi and Ram (2015).…”

Section: Measurementsupporting

confidence: 88%

The Impact of Government Expenditures, Gross Capital Formation, Trade, and Portfolio Investment on the Economic Growth of Asean Economies

Jermsittiparsert¹,

Saengchai²,

Boonrattanakittibhumi³

et al. 2019

JSSI

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“…It has provided a possibility to compare the EU countries by general GE and economic growth indicators. This research has been guided by the estimation of the GE as a percentage of GDP and GDP per capita (Mohammadi and Ram, 2015) in the EU countries. The authors have referred to the methodology prevailing in recent research by Tang (2009), Hamzah (2011), Ahmad and Loganathan (2015) and others.…”

Section: Empirical Evidence and Research Methodologymentioning

confidence: 99%

Government expenditure and economic growth in the European Union countries

Dudzevičiūtė

Šimelytė

Liučvaitienė

2018

IJSE

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Purpose The purpose of this paper is to provide more reliable estimates of the relationship between government spending and economic growth in the European Union (EU) during the period of 1995-2015. Design/methodology/approach The methodology consisted of several different stages. In the first stage for an assessment of dynamics of government spending and economic growth indicators over two decades, descriptive statistics analysis was employed. Correlation analysis helped to identify the relationships between government expenditures (GEs) and economic growth. In the third stage, for modeling the relationship and the estimation of causality between GE and economic growth, Granger causality testing was applied. Findings The research indicated that eight EU countries have a significant relationship between government spending and economic growth. Research limitations/implications This study has been bounded by general GE and economic growth only. The breakdowns of general GE on the basis of the activities they support have not been considered in this paper, which is the main limitation of the research. Despite the limitation, it might be maintained that the research highlights key relationships in the EU countries. Originality/value These insights might be useful for policy makers. In countries with unidirectional causality running from GE to economic growth, the government can employ expenditure as a factor for growth. The governments should ensure that resources are properly managed and efficiently allocated to accelerate economic growth in the countries with unidirectional causality from GDP to GE.

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“…The Wagner's Law was proven because as the output increased, the government intervention would be increasingly needed to manage the natural monopolies. Moreover, Mohammadi and Ram (2015) also proved that there was an existence of the Wagner's Law in Japan and Korea. However, it was not found in Malaysia, Philippines, Singapore and Thailand.…”

Section: Theoretical Backgroundmentioning

confidence: 93%

“…The results of previous studies prove that an increase in the government expenditure was a result of an increased economic growth (Dada & Adewale, 2013;García, 2018;Ismal, 2011;Magazzino, Giolli, & Mele, 2015;Mohammadi & Ram, 2015;Mutuku & Kimani, 2012;Uzuner, Bekun, & Akadiri, 2017;Wang, Peculea, & Xu, 2016). On the other hand, previous researches were unable to prove the Wagner's Law, mentioning that when the economic growth got weakened, the government expenditure would increase (García, 2018).…”

Section: Introductionmentioning

confidence: 91%

“…On the other hand, previous researches were unable to prove the Wagner's Law, mentioning that when the economic growth got weakened, the government expenditure would increase (García, 2018). Furthermore, when the government expenditure increased, the economic growth would also increase (Ighodaro & Oriakhi, 2010;Ismal, 2011;Kurniawati, 2018;Kyaw, 2018;Magazzino et al, 2015;Mohammadi & Ram, 2015;Neduziak & Correia, 2017;Okoro, 2013;Uddin & Aziz, 2015). In addition, the relationship between the two variables showed a negative effect where there was an increase in the government expenditure, it would lower the economic growth (Hasnul, 2016;Manyeki & Kotosz, 2017;Maurya & Sigh, 2017;Ogundipe & Oluwatobi, 2013).…”

Section: Introductionmentioning

confidence: 99%

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Does the Wagner’s Law exist in a strategic national area? An evidence from Kedungsepur - Indonesia

Sasongko¹,

Huruta²,

Wardani³

2019

IRD

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The Kedungsepur National Strategic Area was formed to realize urban areas as the center of national and international economic activities. In order to realize this goal, government expenditure and economic growth are important variables in the development process. Empirically, the study was conducted to analyze the relationship between government expenditure and economic growth from the perspective of Wagner's Law in 6 regencies or cities in the Kedungsepur National Strategic Area during 2012 to 2017. Methodically, this study used Panel Granger Causality and Panel Data Regression to explain the short-term relationship between both variables. The results showed that there was a negative one-way relationship from economic growth to government expenditure. The increase in economic growth in the previous year would reduce the government expenditure in the short term, resulting the Wegner's Law inapplicable in the Kedungsepur National Strategic Area. This was due to the ineffectiveness of institutions, differences in regional expenditure structures towards state expenditures and the lack of government work programs in the productive sector. Thus, a good and coordinative institutional environment was needed to realize the cooperation in crucial sectors, as well as the distribution of regional expenditures on more productive expenditures based on priority interests, aiming at the welfare of the community.

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Economic Development and Government Spending: An Exploration of Wagner’s Hypothesis during Fifty Years of Growth in East Asia

Cited by 7 publications

References 23 publications

The Impact of Government Expenditures, Gross Capital Formation, Trade, and Portfolio Investment on the Economic Growth of Asean Economies

The Impact of Government Expenditures, Gross Capital Formation, Trade, and Portfolio Investment on the Economic Growth of Asean Economies

Government expenditure and economic growth in the European Union countries

Does the Wagner’s Law exist in a strategic national area? An evidence from Kedungsepur - Indonesia

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