RELATIONSHIP BETWEEN PUBLIC EXPENDITURE AND NATIONAL INCOME: AN EMPIRICAL INVESTIGATION OF WAGNER'S LAW IN CASE OF PAKISTAN
Journal: Academic Research International (Vol.2, No. 2)Publication Date: 2012-03-15
Authors : Abdur Rauf Abdul Qayum Prof Khair-uz Zaman;
Page : 533-538
Keywords : public expenditures; national income; cointegration and granger causality.;
Abstract
This study examine the applicability of Wagner’s law (1883)*, national income led growth in public expenditure in the long run, in case of Pakistan for the period of 1979-2009. Moreover the study investigates the direction of causality between public expenditure and national income. To investigate the long run relationship, the ARDL approach to cointegration and for the causality Todo and Yamamoto approach is used in the study. The study concludes that there is no long run relationship between public expenditure and national income at aggregate level. Furthermore, Todo and Yamamoto causality results asserted that there is no causality at all from directions, national income to public expenditure and public expenditure to national income.
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