The Nexus between Government Expenditure and Economic Growth: Evidence of the Wagner’s Law in Kuwait

Ebaid Ali () and Bahari Zakaria
Additional contact information
Ebaid Ali: Economic Programme, School of Social Sciences, Universiti Sains Malaysia, 11800 Gelugor, Penang, Malaysia
Bahari Zakaria: Centre for Islamic Development Management Studies (ISDEV), Universiti Sains Malaysia, 11800 Gelugor, Penang, Malaysia

Review of Middle East Economics and Finance, 2019, vol. 15, issue 1, 9

Abstract: This study is the first attempt to examine the validity of the Wagner’s law hypothesis by employing time-series data over the period from 1970 to 2015 in Kuwait. In this paper, the causal relationship between government expenditure and economic growth is tested by conducting the Granger non-causality test developed by (Toda, H. Y., and T. Yamamoto. 1995. “Statistical Inference in Vector Autoregressions with Possibly Integrated Processes.” Journal of Econometrics 66 (1): 225–250.) and (Dolado, J. J., and H. Lütkepohl. 1996. “Making Wald Tests Work for Cointegrated VAR Systems.” Econometric Reviews 15 (4): 369–386.). The empirical results support the unidirectional causality running from government spending to economic growth. This occurs only when real government expenditure per capita is a proxy for state activity and real gross domestic product (GDP) per capita is a measure of economic growth. This implies that Wagner’s law does not apply for Kuwait’s economy, and the Keynesian proposition of government spending as a policy instrument that encourages and leads economic growth is supported by the data used.

Keywords: Wagner’s law; TYDL Granger non-causality test; Kuwait; government expenditure; economic growth (search for similar items in EconPapers)
JEL-codes: H5 H50 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.1515/rmeef-2017-0001 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:rmeecf:v:15:y:2019:i:1:p:9:n:1

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/rmeef/html

DOI: 10.1515/rmeef-2017-0001

Access Statistics for this article

Review of Middle East Economics and Finance is currently edited by Ghassan Dibeh

More articles in Review of Middle East Economics and Finance from De Gruyter
Bibliographic data for series maintained by Peter Golla ().