Cointegration, Causality and Wagner's Law: A Test for Britain 1870-1913

Les Oxley

Scottish Journal of Political Economy, 1994, vol. 41, issue 3, 286-98

Abstract: Wagner's law, first proposed in 1883, has been tested on numerous occasions for many countries. The evidence presented to date on the existence of 'the law' has been mixed and interpretation have been hampered by the general neglect of such issues as non-stationary and cointegration. Henrekson (1990) considers the stationarity and cointegration properties of Swedish data, but finds no evidence of Wagner's law. In this study cointegration is taken as a necessary condition for the non-spurious existence of Wagner's law and the testing methodology is applied to British data, 1870-1913. Evidence of co-integration and unidirectional Granger causality is found in the data and support for the law is established. Copyright 1994 by Scottish Economic Society.

Date: 1994
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