Cointegration, causality and Wagner's Law in 19th century Europe

John Thornton

Applied Economics Letters, 1999, vol. 6, issue 7, 413-416

Abstract: The long-run tendency for government expenditure to grow relative to GNP, Wagner's law, is tested for six European countries using data from around the mid-19th century to 1913. With few exceptions the results suggest that: nominal and real GNP, nominal and real government expenditure, and population were nonstationary in their levels but stationary in first differences; either nominal GNP and nominal government expenditure and/or real GNP and real government expenditure were cointegrated in five of the six countries, and that these variables were cointegrated with population in the remaining country; and Granger-causality was mainly unidirectional from income to government expenditure. Thus, there is considerable support for Wagner's law in 19th century Europe.

Date: 1999
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DOI: 10.1080/135048599352916

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