LINKAGE BETWEEN ECONOMIC AND GOVERNMENT ACTIVITIES: EVIDENCE FOR WAGNER’S LAW FROM PAKISTAN

Muhammad Umar, Ihtsham ul Haq Padda

Abstract


This paper seeks to find the causal relationship between
government size and economic growth and attempts to find out
whether there is evidence in support of Wagner’s Law or not in
Pakistan. For this purpose, the annual time series data are used to study the relationship between the economic growth and government size. Cointegration, Error Correction Mechanism and Causality methodologies are used to explore the relationship. The five versions of Wagner’s hypothesis are estimated in this study. The results give strong insights that Wagner’s Law does not hold in the short run, however, weak evidence is found of its existence in the long run.

Therefore, policy makers should work for provision of better and
secure environment for investors and reduction of current
expenditures and raise of development expenditures.


Full Text:

PDF


DOI: http://dx.doi.org/10.22555/pbr.v18i3.942

Refbacks

  • There are currently no refbacks.


Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.