Wagner’s law, fiscal discipline, and intergovernmental transfer: empirical evidence at the US and German state levels

Funashima, Yoshito; Hiraga, Kazuki

doi:10.1007/s10797-017-9458-z

Cited by 13 publications

(3 citation statements)

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“…Their results showed evidence in support of Wagner's law. Yoshito Funashima and Kazuki Hiraga (2016) examined the Wagner's law for U.S. and German States. For the U.S. states, the data cover the period from 1977 to 2010.…”

Section: Literature Review and Theoretical Frameworkmentioning

confidence: 99%

Wagner versus Keynes: Empirical evidence from Turkey’s provinces

2020

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Wagner's law and Keynes' hypothesis has long been debated in economics. In this paper, we test the income-expenditure hypothesis for eighty-one of Turkey's provinces for the period 1992 to 2013 using panel data analysis. For this purpose, the validity of these hypotheses is tested by applying recent panel cointegration and causality techniques, allowing for cross-sectional dependence and heterogeneity between regions. Under the presence of cross-sectional dependence and heterogeneity, the level of integration of the variables was tested by means of the cross-sectionally augmented Dickey-Fuller test, the presence of long-run relationship of the variables was tested with the Westerlund-Edgerton Lagrange multiplier bootstrap test, long-run cointegration coefficients were estimated with the Eberhardt-Bond panel augmented mean group method, and finally causality relationship was defined by the Dumitrescu-Hurlin test. The results of this study provide strong support for the validity of Wagner's law and Keynes' hypothesis for Turkey.

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Section: Literature Review and Theoretical Frameworkmentioning

confidence: 99%

Wagner versus Keynes: Empirical evidence from Turkey’s provinces

2020

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“…Wagner's law implies that expenditure grows more than proportionally with income due to economic development (Prado et al, 2020) and provides theoretical principles and enables specific policy suggestions to achieve optimality in expanding public spending and its financing (Forte and Magazzino, 2018). The validity of Wagner's law has been identified by many studies (Tobin, 2005;Tasseven, 2011;Silva and Siqueira, 2014;Akitoby et al, 2006;Karagianni and Pempetzoglou, 2011;Barra et al, 2015;Magazzino et al, 2015;Bayrakdar et al, 2011;Barra et al, 2015;Funashima and Hiraga, 2017). Kumar and Cao (2020) supported Wagner's law in East Asian countries such as China, Hong Kong, Japan and South Korea.…”

Section: Literature Reviewmentioning

confidence: 95%

The determinants of government expenditures in Serbia: The application of ARDL model

Mirović¹,

Kalaš²,

Inđić³

2023

Anali Ekon fak Subotica

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Government expenditures represent one of the most important issues for policymakers both in ordinary and extraordinary conditions. The aim of this paper is to estimate and identify the effects of selected macroeconomic determinants on government expenditures in Serbia from 2002 to 2020. Using the ARDL technique, the empirical findings confirmed that there is a long-run relationship between gross domestic product, government revenues, inflation, and population size and government expenditures for the observed period. The significant and positive effects of explanatory variables are confirmed in the long run, except for inflation, whose impact is not significant in the short run. Specifically, GDP growth, higher inflation rate, greater government revenues and population contribute to the higher government expenditures level. The obtained findings give certain directions to fiscal authorities in creating and defining optimal government expenditures level in the context of influences of chosen macroeconomic variables.

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“…The validity of Wagner’s Law has been found by many researchers, for different countries and regions. For instance, Tobin (2005), for China; Tasseven (2011), for Turkey; Silva and Siqueira (2014), for Brazil; Akitoby, Clements, Gupta, & Inchauste (2006), for 51 developing countries; Karagianni and Pempetzoglou (2011) and Magazzino, Giolli, and Mele (2015), for European Union countries; Bayrakdar, Demez, and Yapar (2015), for 27 OECD countries; Narayan, Nielsen, and Smyth (2008), for 24 Chinese provinces; Jaén‐García (2011), for 17 autonomous communities of Spain; Narayan, Rath, and Narayan (2012), for 15 Indian states; Funashima and Hiraga (2017), for American and German states.…”

Section: Introductionmentioning

confidence: 99%

Wagner’s Law and Fiscal Illusion: An analysis of state government finances in Brazil

Prado

Silva

2020

Review Development Economics

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The aim of this article is to analyze state-level public finances in Brazil. We examine the dynamics of governmental spending in a panel of 26 Brazilian states in search of evidence of Wagner's Law and Fiscal Illusion Hypothesis. For the period ranging from 2002 to 2015, three methodologies are applied: dynamic ordinary least squares (DOLS), fully modified ordinary least squares (FMOLS), and pooled mean group (PMG). The main empirical results found indicate that (1) there is strong evidence of Fiscal Illusion caused by public deficit and by central government transfer grants; (2) there are possible Flypaper Effects; (3) there is no evidence in support of Wagner's Law; (4) there is low publicness degree of local expenditures; (5) due to FiscalIllusion, less-developed Brazilian states tend to be stuck in a public expenditure growth mechanism, especially in expenses related to non-public goods, which tend to benefit private interests and lobby groups. K E Y W O R D S dynamic panel, Fiscal Illusion, Flypaper Effects, public expenditures, Wagner's Law J E L C L A S S I F I C A T I O N C23; H40; H72; H77 | 629 PRADO AnD DA SILVA | INTRODUCTIONBetween 2002 and 2015, federal government spending in Brazil increased approximately 88%, while population grew only 17% and per capita gross domestic product (GDP) expanded 24% in the same period. This growing pattern has also been observed at the state level. Out of the 26 Brazilian state governments, 1 17 have increased their spending by more than 80% in recent years, of which 12 have more than doubled that figure. Part of this increase is due to the type of fiscal federalism chosen after the ratification of the constitution, in 1988. Under Brazil's taxation system, taxation powers are shared among the federal government, states, and municipalities. Nevertheless, this distribution of powers is not balanced enough, and intergovernmental financial transfers were created to solve this problem. Just to give an idea, as of 2015, federal government grants represented more than 40% of the net revenue of 16 Brazilian states. In fact, Figure 1 (left graph) shows a significant correlation between public spending and transfer revenues made by the federal administration and to the states.Such growth in public spending has different explanations in the literature. For instance, Wagner (1883) sees the increasing pattern in public expenditure as inevitable, due to growing demand for government-provided goods and services, especially after the beginning of industrialization. The socalled Wagner's Law claims that there is a long-run trend of more than a proportional growth in government spending, relative to production (an income elasticity of demand for government-provided goods and services higher than 1), due to increase in national income.The validity of Wagner's Law has been found by many researchers, for different countries and regions.

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Wagner’s law, fiscal discipline, and intergovernmental transfer: empirical evidence at the US and German state levels

Cited by 13 publications

References 34 publications

Wagner versus Keynes: Empirical evidence from Turkey’s provinces

Wagner versus Keynes: Empirical evidence from Turkey’s provinces

The determinants of government expenditures in Serbia: The application of ARDL model

Wagner’s Law and Fiscal Illusion: An analysis of state government finances in Brazil

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