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Wagner's Law in 19th Century Greece: A Cointegration and Causality Analysis

Dimitrios Sideris

No 64, Working Papers from Bank of Greece

Abstract: The validity of Wagner’s law, which states that the growth of public expenditure can be explained as a result of the increase in economic activity, is tested for Greece during the period 1833-1938. This represents a period of growth, industrialisation and modernisation of the economy, conditions which should be conducive to Wagner’s law. In addition, the long data sample ensures the reliability of the results in terms of economic significance and statistical inference. Cointegration analysis provides positive evidence for the existence of a long-run relationship between government expenditure and national income, and Granger causality tests indicate that causality runs from income to government expenditure. The results support Wagner’s hypothesis, in line with other empirical studies examining the validity of the hypothesis in 19th century economies.

Keywords: Public expenditure; Wagner’s law; cointegration. (search for similar items in EconPapers)
JEL-codes: H1 H5 N43 N44 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2007-12
New Economics Papers: this item is included in nep-his
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