Relationship between Government Expenditure and Economic Growth: An Analysis of Wagner's Law in Former Soviet Union Countries (1995-2009)

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Agayev S.

ESKISEHIR OSMANGAZI UNIVERSITESI IIBF DERGISI-ESKISEHIR OSMANGAZI UNIVERSITY JOURNAL OF ECONOMICS AND ADMINISTRATIVE SCIENCES, cilt.7, sa.2, ss.7-27, 2012 (ESCI, TRDizin)

• Yayın Türü: Makale / Tam Makale
• Cilt numarası: 7 Sayı: 2
• Basım Tarihi: 2012
• Dergi Adı: ESKISEHIR OSMANGAZI UNIVERSITESI IIBF DERGISI-ESKISEHIR OSMANGAZI UNIVERSITY JOURNAL OF ECONOMICS AND ADMINISTRATIVE SCIENCES
• Derginin Tarandığı İndeksler: Emerging Sources Citation Index (ESCI), TR DİZİN (ULAKBİM)
• Sayfa Sayıları: ss.7-27
• Recep Tayyip Erdoğan Üniversitesi Adresli: Evet

Özet

This study tests Wagner's law for a panel of 10 former Soviet Union member countries over the period of 1995-2009. Wagner's law indicates that government activities expand together with economic development. Empirical results from panel co-integration test suggest that there is long-run equilibrium relationship between government expenditure and income level. Results of panel causality test that based on two stages lest square model and traditional Granger causality test that based on error correction model show that there is unidirectional causality running from economic growth to government expenditure expansion. Finally, fixed and random effect estimations of five Wagner's law regressions give some evidences that increase in income level expands government activities. These results suggest that Wagner's law holds in former Soviet Union countries.