Public spending, voracity, and Wagner's law in developing countries

Akitoby, Bernardin; Clements, Benedict; Gupta, Sanjeev; Inchauste, Gabriela

doi:10.1016/j.ejpoleco.2005.12.001

Cited by 190 publications

(165 citation statements)

References 19 publications

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“…Empirical evidence for this argument is mixed. Akitoby et al (2006) argue that, though there is strong evidence from industrialized countries, Wagner"s law does not hold true in developing countries like China. Recent studies also cast doubt on the existence of Wagner"s law (Halicioglu 2003;Lin and Song, 2002;Iyare and Lorde, 2004;Ram 1987;Sinha 2007;Zhang 2007Zhang , 2008aZiramba 2008).…”

Section: Variables Explaining Government Size and Theoretical Argumentsmentioning

confidence: 99%

Determinants of government size: evidence from China

Lin

2010

Public Choice

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This paper investigates the determinants of government size at the provincial level in China. We employ the panel data model as a platform for empirical analysis and control for endogeneity in the study. Our study shows that openness to trade and foreign direct investment (FDI) may curtail government expansion, and that the provincial-level public sector is characterized by economies of scale. This study also documents that Wagner"s law does not hold true for China. Moreover, both expenditure decentralization and revenue decentralization contribute to the expansion of China"s government.

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Section: Variables Explaining Government Size and Theoretical Argumentsmentioning

confidence: 99%

Determinants of government size: evidence from China

Lin

2010

Public Choice

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“…In his opinion there is no crowding-out effect of private investment. Akitoby et al (2006) presented an innovative study that takes into account both the short and the long term in the study of the relationship between public spending and production, using a model of correction of error for a sample of 51 developing countries. They found that the product and government spending are cointegrated in at least 70% of the countries, involving a long-term relationship in line with the WH, which contrasts with the existing literature that provides a weak support for the WH in developing countries.…”

Section: Literature Reviewmentioning

confidence: 99%

The Relationship between Total Production and Public Spending in Mexico: Keynes versus Wagner

Juárez¹,

Almada²,

Bustillos³

2015

International Journal of Financial Research

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This paper studies the relationship between public spending and production in Mexico. It aims to assess the direction of causality between these two variables ranging from economic growth to public expenditure (Wagner hypothesis) or public spending to economic growth (Keynesian hypothesis). Annual time series for the period 1925-2014 of production and public spending in real terms (1970 based) and logarithms were used. The test method involved three steps: 1) unit root tests; 2) cointegration test of Engle and Granger and 3) evidence of causality in the Granger sense. The paper uses five different specifications recommended by the specialized international literature. It was found that the series are stationary with regards first differences and are cointegrated, so we can say there is a long-term relationship. Statistical tests of Granger causality indicated that the Wagner hypothesis does not hold, while the Keynes hypothesis is validated. The study concludes that public spending and its proper management is one of the keys to promoting economic growth in Mexico. Originality/value: Time series for a long-term period, based on official information, something not done previously, were developed. This allowed the results to be more reliable than those presented by other authors. In addition, a modern procedure of econometric estimation, allowing the assessment of the two proposed scenarios was used. The work is relevant in terms of the design of economic policy and the pursuit of development in Mexico.

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“…Basri and Rahardja (2011) find that unanticipated shocks in central government spending had a little negative effect on real GDP. In the same spirit, regarding to the cyclicality of fiscal policy, Akitoby et al (2006) and Baldacci (2009) do not find any counter-cyclicality in fiscal policy. However, Abdurohman (2013) shows that fiscal policy tends to be pro-cyclical.…”

Section: Literature Reviewmentioning

confidence: 86%

“…Following methodology used by Akitoby et al (2006), we suppose there is a steadystate (or long-run path) relationship between actual budget and the key macroeconomic variable given by:…”

Section: Methodsmentioning

confidence: 99%