The validity of Wagner’s Law in the United Kingdom for the period 1850-2010

Working paper


Richter, C. and Paparos, Dimitrios 2012. The validity of Wagner’s Law in the United Kingdom for the period 1850-2010. Bonn, Germany International Network for Economic Research.
AuthorsRichter, C. and Paparos, Dimitrios
TypeWorking paper
Abstract

The relationship between national income and government spending is one of the most debated topics between economists and policy makers during the last decades. The objective of this paper is to examine the Wagner’s law validity, and if it can be applied in the U.K. public spending expansion for the period 1850-2010. According to Wagner’s hypothesis, fundamental economic growth is a determinant to the public sector growth. The public sector is said to be able to grow at a very high rate when compared to the national income. The data covers a period in which U.K. economy faced increased economic growth, government spending and met most of the assumption of Wagner’s Law (industrialisation, urbanisation, increased population). Furthermore, the long data set ensures the reliability of our results in terms of statistical and economic conclusions. We apply unit root tests, unit root tests with structural breaks, cointegration techniques and Granger causality tests. Our results indicate a presence of a long run relationship between national income and government spending, while the causality is bi-directional, thus we find support of Wagner’s and Keynesian hypotheses.

KeywordsWagner's Law; long time series; applied econometrics
Year2012
PublisherInternational Network for Economic Research
Place of publicationBonn, Germany
Web address (URL)http://www.infer-research.net/files_publications/WP%202012_9%20-%20Richter%20Dimitrios.pdf
Publication dates
PrintNov 2012
Publication process dates
Deposited27 Nov 2012
Series INFER Working Papers 2012.9
Publisher's version
License
CC BY-ND
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