A logistic growth law for government expenditures: an explanatory analysis

Massimo Florio and Sara Colautti

Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano

Abstract: Wagner's Law would imply an exponential growth process of the ratio between public expenditures and national income (G/Y). However the law may be rejected both on theoretical and empirical reasons, because it disregards the role of ever increasing distortionary taxation. But, under someconditions, the combination of Wagner's Law and the Pigou's conjecture that the excess burden oftaxation constraints the growth of public expenditures, may be captured by a non-linear first orderdifferential equation. The equation is the Verhulst's logistic, originally invented to model althusian predictions on population growth. The integration of a Verhulst equation generates a S-shaped curve and preliminary econometric estimates on very long run trends (around 1870-2000) of G/Y in US, UK, France, Germany, Italy, Sweden seem to confirm similar logistic trajectories, in spite of different individual parameters.

Date: 2001-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:mil:wpdepa:2001-13

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