Sinha, Dipendra (2007): Does the Wagner’s Law hold for Thailand? A Time Series Study.
Download (292kB) | Preview
Wagner’s Law suggests that as the GDP of a country increases, so does its government expenditure. We test for the Law for Thailand using recent advances in econometric techniques. Both total and per capita GDP and government expenditure are used. Ng-Perron unit root tests show that all variables are integrated of order 1. Toda-Yamamoto tests of Granger causality show that there is no causality flowing from either direction between GDP and government expenditure. Autoregressive Distributed Lag (ARDL) tests of cointegration show very weak evidence of a long-run relationship between GDP and government expenditure. Thus, we do not find much evidence that the Wagner’s Law holds for Thailand.
|Item Type:||MPRA Paper|
|Institution:||Ritsumeikan Asia Pacific University, Japan and Macquarie University, Australia|
|Original Title:||Does the Wagner’s Law hold for Thailand? A Time Series Study|
|Keywords:||Wagner's Law; causality|
|Subjects:||O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development
H - Public Economics > H5 - National Government Expenditures and Related Policies > H50 - General
C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes
|Depositing User:||Dipendra Sinha|
|Date Deposited:||05. Apr 2007|
|Last Modified:||13. Feb 2013 07:43|
Afxentiou PC, Serletis A. Modeling the relationship between output and government expenditures in Canada. Keio Economic Studies 1992;29; 17-43.
Asian Development Bank. Asian Development Outlook 2006: Update. Asian Development Bank: Manila; 2006.
Bird RM. Wagner’s law of expanding state activity. Public Finance 1971;26; 1-26.
Chang T, Liu W, Caudill SB. A re-examination of Wagner’s law for ten countries based on cointegration and error correction modelling techniques. Applied Financial Economics 2004;14; 577-589.
Dickey DA, Fuller WA. Distributions of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association 1979;74 (Part I); 427-431.
Dickey DA, Fuller WA. Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica 1981;49; 1057-1072.
Elliot G, Rothenberg TJ, Stock J. Efficient tests for an autoregressive unit root, Econometrica 1996;64; 813-836.
Goffman IJ. On the empirical testing of Wagner’s law: A technical note. Public Finance 1968;23; 359-364.
Government of Thailand, National Income of Thailand 2006 (http://www.nesdb.go.th/econsocial/macro/gdp_data/reportagdp.asp?heading_id=49)
Gupta SP. Public expenditure and economic growth: A time series analysis. Public Finance 1967;22; 423-466.
Henrekson M. Wagner’s law - A spurious relationship. Public Finance 1993;48; 406-415.
Heston A, Summers R, Aten B. Penn World Table Version 6.2. Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, September 2006.
Kolluri BR, Panik MJ, Wahab, M.S. Government expenditure and economic growth: Evidence from G7 countries. Applied Economics 2000; 32; 1059-68.
Lin C-A. On the level of persistence in government size: time series evidence and implications for the US. Applied Economics 2002;34; 999-1005.
Mackinnon JG. Numerican distribution functions for cointegration and unit root tests. Journal of Applied Econometrics 1996; 11; 601-18. Mann AJ. Wagner’s law: An econometric test for Mexico. National Tax Journal 1980; 33; 189-201.
Michas NA. Wagner’s law of public expenditure: What is the appropriate measurement for a valid test. Public Finance 1975;30; 77-84.
Mohsin Md, Naidu CR, Kamaiah B. Wagner’s hypothesis: Evidence from Indian states. Indian Economic Journal 1995;43; 76-95.
Ng S, Perron P. Lag length selection and the construction of unit root tests with good size and power. Econometrica 2001;69; 1519-1554.
Patmasiriwat D 1995. Impact of industrialization on government finance. In Medhi Krongkaew M (Ed) Thailand’s Industrialization and its Consequences. St. Martin’s Press: New York; 1990. p. 149-153.
Pesaran HM, Shin Y, Smith RJ. Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics 2001;16; 289-326. Pryor FL. Public expenditure in communist and capitalist nations. George Allen and Unwin: London; 1968. Ram R. Government size and economic growth: A new framework and some evidence from cross-section and time series data. American Economic Review 1986;76; 191-203.
Ram R. Wagner’s hypothesis in time-series and cross-section perspectives: Evidence from “real” data for 115 countries. Review of Economics and Statistics 1987;69; 194-204.
Rambaldi AN, Doran HE. Testing for Granger non-causality in cointegrated systems made easy, Working paper in econometrics and applied statistics no. 88;1996, University of New England.
Sinha D. Economic growth and government expenditure in India: A time series analysis. International Review of Economics and Business 1998;45; 263-274. Toda HY, Yamamoto T. Statistical inferences in vector autoregressions with possibly integrated processes, Journal of Econometrics 1995;66; 225-50.