Wagner’s Law: Is It Valid in India?

Rudra Prakash Pradhan

The IUP Journal of Public Finance, 2007, vol. V, issue 2, 7-20

Abstract: The paper investigates the validity of a long-run relationship between public expenditure and income (Wagner’s Law) in the case of India over the period 1970-2004. The study, by using the modern time series econometric technique, finds evidence of long-run relationship between public expenditure and income but rules out the validity of Wagner’s Law. This is because there is no unidirectional causality from income to public expenditure. However, the study finds evidence of a unidirectional causality from public expenditure to income. It eventually suggests that public expenditure is an important policy tool to influence income level in the economy.

Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjpf:v:05:y:2007:i:2:p:7-20

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