The Relationship between Economic Growth and Government Expenditure: Evidence from Sudan

Abstract

<p>In the economic literature, there are two opposing views on the relationship between economic growth and the size of the government. The Wagner hypothesis states that as the economy grows so does the size of the public sector. This is in contrast to the Keynesian view that the growth of government expenditure results in the growth of GDP. The Wagner hypothesis was tested for different countries and the results were conflicting. The primary objective of this paper is test the Wagner hypothesis in the context of the Sudan for the period 1970-2010. The methodology used is cointegration, causality, and error correction model (ECM). The results for the Sudan indicate that the data for the period considered supports the Wagner’s hypothesis.</p

Public expenditure on agriculture and economic growth: a case study of Meghalaya

“…This supports the Wagner's law i.e. ; economic growth is a determinant of public sector growth (Salih 2012;Srinivasan 2013;Wang et al 2016). Furthermore, the lack of reverse causal flow from the agriculture to economic growth reveals that agricultural sector has been neglected in economic development.…”

“…Wagner's law emphasizes economic growth as the fundamental determinant of public expenditure (Wagner 1883), while the Keynesian approach states that public expenditure is a fundamental determinant of economic growth (Keynes 1936). The studies of Salih (2012) in Sudan; Srinivasan (2013) in India; Wang et al (2016) in Romania support the Wagner's law. On the other hand, studies by Okezie et al (2013) and Guandong & Muturi (2016) in South Sudan support the Keynesian principle.…”

The Relationship Between Government Spending and Economic Growth Revisited

“…On the other hand, studies by Kalam and Aziz (2009) in Bangladesh and Rahman et al (2010) in Pakistan found a causal relationship (cause and effect) between national income and public spending (in accordance to Wagner's law). Grullón (2012) study in the Dominican Republic and Salih (2012) study in Sudan support Wagner's law as well. In contrast, Magazzino (2010) study in Italy confirms the validity of the Keynesian hypothesis for government spending.…”

Trivariate analysis of oil revenue, government spending and economic growth in Nigeria

“…Contributing to the empirical literature on the debate about the validity of the Wagner's hypothesis, Salih () tested the hypothesis in the context of Sudan for the period 1970–2010. The results supported the Wagner hypothesis as the growth of per capita real GDP had unidirectional relationship with the share of government spending to GDP.…”