Wagner’s law versus displacement effect

Funashima, Yoshito

doi:10.1080/00036846.2016.1203063

Cited by 14 publications

(7 citation statements)

References 38 publications

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“…This proposition was hatched around 1883. Ever since the unveiling of this proposition, followers of this view have expressed mixed opinions (Gatsi et al, 2019;Manyeki and Kotosz, 2017;Keho, 2017;Lawal et al, 2020;Asaleye et al, 2020;Lawal et al, 2019;Babajide et al, 2020;Olanrele et al, 2020;Aktan, 2017;Ifeyinwa, Idenyi, Chibuzor & Agbi, 2016;Eze, 2016;Salwindi and Seshamani, 2016;Dahunsi et al, 2019;Moore, 2016;Atasoy and Gur, 2016;Ampah and Kotosz, 2016;Magazzino et al, 2015;Funashima, 2015). Among early versions that propelled dichotomization of WP are that of Peacock and Wiseman (PW) (1961), Musgrave (1969), Gupta (1967), Goffman (1968), Peacock & Wiseman shared version (1967), among others; each explaining its own version of the proposition based on their scholarly standpoint.…”

Section: Introductionmentioning

confidence: 99%

Wagner proposition in Nigeria: An econometric analysis

Babajide

Okunlola

Nwuba

et al. 2020

Heliyon

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Succinct exploration of Adolph Wagner's Proposition [WP] 1883-Peacock and Wiseman 1961version was put to the validation test in the study. At least, this time, for a quinaquina octo annis period, representing the life span of Nigeria. Specific suspicion of shocks from data from the world indicator and monetary authority necessitated the adoption of the ADF test with structural breaks, which came out positive at alternating integrating order. This propelled the Autoregressive Distributed Lag ARDL model path having specified the lag selection automatically. Even though the series showed significant association in the short run, and bi-directional causality, the result of the Bound test-F-statistics (calculated) ¼ 3.42 falls below upper Bound I(0) ¼ 4.68 and lower bound I(1) ¼ 5.15 hence, invalidates the WP position in the longrun in Nigeria. This is an indication that a reduction in noneconomically viable and overlapping, funds-straining ministries/departments/agencies (MDA) is indispensable.

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Section: Introductionmentioning

confidence: 99%

Wagner proposition in Nigeria: An econometric analysis

Babajide

Okunlola

Nwuba

et al. 2020

Heliyon

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“…The best known theory about the effects of development on government size is the so called Wagner's law, which states that the relative size of government increases with real GDP per capita due to the greater complexity of government functions and the luxurious nature of public goods and services. See Shelton (2007) and Funashima (2017) for evaluations of the Wagner's law and surveys of alternative theories of government size. 12.…”

Section: Database I: Usaid Collecting Taxesmentioning

confidence: 99%

Do Countries Really Deviate from the Optimal Tax System?

Sepúlveda

2022

Public Finance Review

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One of the main goals of the literature on optimal tax systems is to reduce the gap between the highly stylized theory of optimal taxation and the practice of fiscal policy reform. Unfortunately, however, we know little about the extent to which the international experience follows the policy prescriptions derived from economic theory, or how those policy prescriptions would change with economic development. Based on the standard theory of optimal tax systems, this paper predicts the possible effects of economic development on the optimal level and composition of tax revenue and empirically tests these predictions with yearly data on three tax instruments from countries at different stages of development. In average, as countries develop, they are shown to collect more tax revenue and switch from regressive tax instruments like the value added tax, to more progressive taxes that become more productive with development, like the personal and corporate income taxes.

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“…Ageli (2013) tests what is called the PW version of the displacement effect hypothesis for Saudi Arabia. Funashima (2017) tests the displacement effect in a wavelet context. According to this study, when a significant region of the public expenditure variable spectrum coincides with the region of coherence between public expenditure and GDP, long-term growth of PE/GDP is due to Wagner's law.…”

Section: Literature Reviewmentioning

confidence: 99%

Displacement Effect and Ratchet Effect: Testing of Two Alternative Hypotheses

Jaén-García

2021

SAGE Open

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This article empirically tests the displacement effect of Peacock and Wiseman (PW) and the ratchet effect of Bird, both of which are alternatives to Wagner’s law on the growth of public expenditure. The displacement effect explains why the (horizontal) trend line moves upward in discrete steps over time, whereas the ratchet effect affirms that public expenditure “ratchets” during drops in the economy and remains at a higher level after the economy stabilizes. The following innovations are introduced in the present study: (a) empirical testing was conducted for Spain and an extensive time period, 1880–2016; (b) the relationship between PR and expenditure was considered, introducing Gross Domestic Product (GDP) as a control variable; and (c) testing was performed using two differentiated methodologies. More specifically, the two methodologies employed were unit roots and cointegration with structural breakpoints and the more recent wavelet methodology. Given that PW refer to situations of social upheaval and its consequences, this study places its focus on analyzing the changes produced in Spain’s public expenditure with respect to the Spanish Civil War of 1936–1939 and to other disruptions both before and after this date. It was concluded that the displacement effect explains the development of Spanish public expenditure for the crises of 1982 and 1998. Meanwhile, wavelet methodology explains growth that took place in 1920 and 1980. In contrast, the ratchet effect does not explain the development of Spanish public expenditure over the study period.

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Wagner’s law versus displacement effect

Cited by 14 publications

References 38 publications

Wagner proposition in Nigeria: An econometric analysis

Wagner proposition in Nigeria: An econometric analysis

Do Countries Really Deviate from the Optimal Tax System?

Displacement Effect and Ratchet Effect: Testing of Two Alternative Hypotheses

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