Wagner's Law revisited: cointegration and causality tests for New Zealand
Wagner's Law states that the share of government expenditure in Gross National Product (GNP) will increase with economic development; many associated empirical studies substitute GNP with Gross Domestic Product (GDP). This article presents an empirical investigation into the validity
of Wagner's Law for New Zealand over the period 1960 to 2007 and compares the results obtained using these two measures of output. Application of the Autoregressive Distributed Lag (ARDL) bounds test suggests a cointegrating relationship between either output measure and the share of government
spending, and further application of General to Specific (GETS), Engle and Granger (EG), Phillip Hansen's Fully Modified Ordinary Least Squares (FMOLS) and Johansen's time series techniques illustrate statistical robustness and an income elasticity between 0.56 and 0.84. The results suggest
that output measures Granger cause the share of government expenditure in the long run, thereby providing support for Wagner's Law, and these results are stable irrespective of the chosen output measure.
Document Type: Research Article
Affiliations: Department of Economics,Auckland University of Technology, Auckland, New Zealand
Publication date: 01 February 2012
- Editorial Board
- Information for Authors
- Subscribe to this Title
- Ingenta Connect is not responsible for the content or availability of external websites
- Access Key
- Free content
- Partial Free content
- New content
- Open access content
- Partial Open access content
- Subscribed content
- Partial Subscribed content
- Free trial content