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Testing for structural changes in the Wagner’s Law for a sample of East Asian countries

Saten Kumar () and Zhaoyi Cao ()
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Saten Kumar: Auckland University of Technology
Zhaoyi Cao: Auckland University of Technology

Empirical Economics, 2020, vol. 59, issue 4, No 17, 1959-1976

Abstract: Abstract This paper examines the Wagner’s Law for a sample of East Asian countries (China, Hong Kong, Japan and South Korea) by utilizing the structural break methods viz., Gregory and Hansen (J Econom 70:99–126, 1996a; Oxf Bull Econ Stat 58:555–559, 1996b), Carrion-i-Silvestre and Sanso (Oxf Bull Econ Stat 68:623–646, 2006) and Bai and Perron (Econometrica 66:47–78, 1998; J Appl Econom 18:1–22, 2003). We find that there exists weak cointegrating relationship between the log of nominal public expenditure as a share of nominal GDP to the log of real per capita GDP. However, we find support for the Wagner’s Law when the relationship is extended to include a measure of the population structure—the dependency ratio. Our findings support the explanations suggested by Durevall and Henrekson (J Public Econ 95(7–8):708–722, 2011).

Keywords: Government spending; Dependency ratio; Cointegration; Structural breaks (search for similar items in EconPapers)
JEL-codes: C22 H50 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s00181-019-01686-5

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