Wagner and the Fading Voracity Effect: Short vs. Long-Run Effects in Developing Countries

Joao Jalles

No 2019/0101, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: This paper empirically revisits the validity of Wagner’s proposition in a panel of 149 developing countries between 1980-2015 by focusing on different components of government expenditure. We rely on an ARDL approach which allow us to uncover short and long-run cyclicality coefficients. Our results do not overwhelmingly support the existence of higher than unity long-run elasticities of government spending components vis-a-vis economic growth, suggesting that the Wagner’s regularity is more the exception than the norm. Moreover, the case for voracity is fading away as developing countries catch-up the development ladder and graduate from procyclicality. In fact, most short-run elasticities are countercyclical. Finally, some macroeconomic and institutional and political characteristics affect the degree of government spending cyclicality.

Keywords: government expenditure; fiscal policy; government size; political economy; mean group; panel stationarity; cross-sectional dependency; weighted least squares; autoregressive distributed lag (search for similar items in EconPapers)
JEL-codes: C33 E62 H50 O47 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-mac
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Journal Article: Wagner and the fading voracity effect: short vs. long-run effects in developing countries (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ise:remwps:wp01012019

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