Wagner and the fading voracity effect: short vs. long-run effects in developing countries

Joao Jalles

Review of Development Finance Journal, 2019, vol. 9, issue 1, 51-78

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 longrun 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; crosssectional 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
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Working Paper: 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:afj:journ3:v:9:y:2019:i:1:p:51-78

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