Open Access Journal Article

Public spending and economic growth in Ivory Coast: Wagner’s law

by Siriki Coulibaly a, b,* orcid  and  Pierre Guei a, b orcid
a
Department of Economics, Université Péléforo Gon Coulibaly, Korhogo, Côte d'Ivoire
b
DEECAF, Rennes, France
*
Author to whom correspondence should be addressed.
EAL  2022 1(2):7; https://doi.org/10.58567/eal01020002
Received: 7 December 2022 / Accepted: 13 December 2022 / Published Online: 28 December 2022
View Full-Text
Download PDF

Abstract

This study simultaneously tests Wagner’s law on one hand and Keynes proposition on the other hand related both government spending and output in Ivory Coast that experiencing long run economic growth and widened deficit. That challenges the country’s fiscal sustainability. With annual data from 1980 to 2020, results show that Wagner’s law holds, the elasticity of government spending to output is greater than one. There is bidirectional causality between government size and output validating Keynesian idea that public expenditure is an exogenous factor and a policy instrument for increasing national income. Wagner law and public deficit can justify Ivorian over-indebtedness.

Keywords: Government spending, GDP growth, Wagner law, Causality;
Copyright: © 2022 by Coulibaly and Guei. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
Show Figures

Share and Cite

ACS Style
Coulibaly, S.; Guei, P. Public spending and economic growth in Ivory Coast: Wagner’s law. Economic Analysis Letters, 2022, 1, 7. https://doi.org/10.58567/eal01020002
AMA Style
Coulibaly S, Guei P. Public spending and economic growth in Ivory Coast: Wagner’s law. Economic Analysis Letters; 2022, 1(2):7. https://doi.org/10.58567/eal01020002
Chicago/Turabian Style
Coulibaly, Siriki; Guei, Pierre 2022. "Public spending and economic growth in Ivory Coast: Wagner’s law" Economic Analysis Letters 1, no.2:7. https://doi.org/10.58567/eal01020002
APA style
Coulibaly, S., & Guei, P. (2022). Public spending and economic growth in Ivory Coast: Wagner’s law. Economic Analysis Letters, 1(2), 7. https://doi.org/10.58567/eal01020002

Article Metrics

Article Access Statistics

References

  1. Abizadeh, S., and J. Gray. (1985). Wagner’s Law: A Pooled Time-Series Cross-Section Comparison. National Tax Journal, 88, 209-218. https://doi.org/10.1086/NTJ41792010
  2. Acémoglu, D; Johnson, S; Robinson, J and Y. Thaicharoen. (2003). Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth. Journal of Monetary Economics. Vol. 50, 49-123. https://doi.org/10.1016/S0304-3932(02)00208-8
  3. Afonso, A. (2005). Fiscal sustainability: The unpleasant European case. FinanzArchiv/Public Finance Analysis, 19-44. http://hdl.handle.net/10400.5/2123
  4. Akitoby, B., Clements, B., Gupta, S., and Inchauste, G. (2006). Public spending, voracity and Wagner’s law in developing countries. European Journal of Political Economy, 22(4):908– 924. https://doi.org/10.1016/j.ejpoleco.2005.12.001
  5. Ansari, M.I., Gordon, D.V., and C. Akuamoach. (1997). Keynes versus Wagner: Public Expenditure and National Income for Three African Countries. Applied Economics, 29, 543- 550. https://doi.org/10.1080/000368497327038
  6. Aregbeyen, O. (2006). Cointegration, Causality and Wagner’s Law: A Test for Nigeria, 1970- 2003. Central Bank of Nigeria Economic and Financial Review, 44(2). June. https://dc.cbn.gov.ng/efr
  7. Burney, Nadeem A. (2002). Wagner’s Hypothesis: Evidence from Kuwait Using Cointegration tests. Applied Economics (34), 49-57. https://doi.org/10.1080/00036840010027540
  8. Caballero, R. J., & Krishnamurthy, A. (2004). Fiscal Policy and Financial Depth. Available at SSRN 548384. https://doi.org/10.3386/w10532
  9. Chang, T. (2002). An Econometric Test of Wagner’s Law for Six Countries, based on Cointegration and Error-Correction Modelling Techniques. Applied Economics, 34, 1157-1169. https://doi.org/10.1086/NTJ41792010
  10. Dogan, E. and Tang, T. (2006). “Government expenditure and National income: Causality tests for five south east Asian countries”. International Business and Economics Research Journal, 5(10):49–58. https://doi.org/10.19030/iber.v5i10.3516
  11. Ebaidalla M. (2013). Causality between Government expenditure and National income: Evidence from Sudan. Journal of Economic Cooperation and Development, 34(4) :61–76. https://www.researchgate.net/profile/Ebaidalla-Ebaidalla-2/publication/283504103
  12. Easterly, W., & Rebelo, S. (1993). Fiscal policy and economic growth. Journal of monetary economics, 32(3), 417-458. https://doi.org/10.1016/0304-3932(93)90025-B
  13. Gavin, M and R. Perotti. (1997). Fiscal Policy in Latin America. NBER Macroeconomics Annual, 11-61. https://doi.org/10.1086/654320
  14. Govindaraju, C., Rao, R., and Anwar, S. (2011). Economic growth and Government spending in Malaysia: A re-examination of Wagner and Keynesian views. Economic Change and Restructuring, 44(3) :203–219. https://doi.org/10.1007/s10644-010-9099-z
  15. Hakkio, G. and M. Rush. (1991). Is the Budget Deficit Too Large?. Economic Inquiry, 29, 429–445. https://doi.org/10.1111/j.1465-7295.1991.tb00837.x
  16. Henrekson, M. (1993). Wagner’s Law: A Spurious Relationship? Public Finance, 48(2), 406-415.
  17. Huang, C-J. (2006). Government Expenditures In China And Taiwan: Do They Follow Wagner’s Law? Journal of Economic Development, Volume 31, Number 2, December 2006. https://www.researchgate.net/publication/227450354
  18. Kirchgässner, G., & Prohl, S. (2008). Sustainability of Swiss fiscal policy. Swiss Journal of Economics and Statistics, 144(1), 57-83. https://doi.org/10.1007/BF03399249
  19. Koester, G., & Priesmeier, C. (2013). Does Wagner's law ruin the sustainability of German public finances? . FinanzArchiv/Public Finance Analysis, 256-288. https://doi.org/10.1628/001522113X671128
  20. Pesaran, H., Shin, Y., and R.J. Smith. (2001). “Bounds Testing Approaches to the Analysis of Level Relationships,” Journal of Applied Econometrics, 16, 289-326. https://doi.org/10.1002/jae.616
  21. Phu, N. and Pham, T. (2017). Croissance économique et Taille du secteur public. Bulletin de l’Observatoire des Politiques Économiques en Europe (OPEE), 36(4), 21–24. https://opee.unistra.fr/Croissance-economique-et-taille-du-secteur-public
  22. Quintos, C. E. (1995). Sustainability of the deficit process with structural shifts. Journal of Business & Economic Statistics, 13(4), 409-417. https://doi.org/10.1080/07350015.1995.10524615
  23. Rehman, H., Ahmed, I., and Awan, M. (2007). Testing Wagner’s law for Pakistan: 1972-2004. Pakistan Economic and Social Review, 45(2):155–166. https://www.jstor.org/stable/25825312
  24. Riascos, A., & Vegh, C. A. (2003). Procyclical government spending in developing countries: The role of capital market imperfections. unpublished (Washington: International Monetary Fund). https://www.researchgate.net/profile/Carlos-Vegh/publication/253760348
  25. Semedo, G. (2007). L’évolution des dépenses publiques en France : loi de Wagner, cycle électoral et contrainte européenne de subsidiarité. L'Actualité économique, 83(2), 123–162. https://doi.org/10.7202/017515ar
  26. Slimane, S. B., Tahar, M. B., & Carthage, L. I. (2010). Why is fiscal policy procyclical in MENA countries . International Journal of Economics and Finance, 2(5), 44-53. https://erf.org.eg/app/uploads/2014/08/566.pdf
  27. Wagner, A. (1883). Three Extracts on Public Finance, in R.A. Musgrave and A.T. Peacock (eds) (1958), Classics in the Theory of Public Finance, London: Macmillan. https://doi.org/10.1007/978-1-349-23426-4_1
  28. Wagner, R.E., and W.E. Weber. (1977). Wagner’s Law, Fiscal Institutions and the Growth of Government. National Tax Journal, 30, 59-68. https://doi.org/10.1086/NTJ41862113
  29. Wu, S., Tang, J., and Lin, E. (2010). The impact of government expenditure on economic growth: How sensitive to the level of development? Journal of Policy Modeling, 32(6) :804– 817. https://doi.org/10.1016/j.jpolmod.2010.05.011