Examination of Wagner’s Hypothesis Using annual data of 1967-2007 of Iranian economy

Subject Areas : Applied Economics

غلامعلی حاجی ¹ (مسئول مکاتبات)
محمد حسن فطرس ² (ندارد)

Received: 2011-04-06 Accepted : 2011-09-13 Published : 2011-03-21

Keywords: Economic growth, Public Sector, Wagner’s Law,

Abstract :

Using annual data of 1967-2007 of Iranian economy, this paper examines the strength of Wagner’s Hypothesis. According to Wagner; an overall income growth in an economy leads to relatively larger expansion of the government activities and causes the government expenditure to increase. Using the autoregressive distributive lag (ARDL) of Pesaran et al. (2001) six separate long-term relationships are estimated: (1) government expenditure and output, (2) share of government expenditures in total output and; output, (3) share of government expenditures in total output and; per capita output, (4) per capita government expenditures and; per capita output, (5) government expenditures and; per capita output and finally, (6) government consumption expenditures and; output. According to this study, models (3) & (6) do not confirm any long-term relations between variables while the rest of the estimated models show that a long-term relation is detected. In addition, models (4) and (5) support the Wagner’s Hypothesis