The relationship between public expenditure and real gross domestic product (GDP) is discussed theoretically and has been tested empirically by many researchers for a long time. Most of the studies focus on the direction of causality between two variables to determine whether the Wagner Law or Keynesian Hypothesis is valid. Due to the important duties of governments in terms of fiscal policy, the growth of the economy is important. The Wagner Law suggests a positive relationship between public expenditure and real GDP, and it is claimed that the causality is from real GDP to public expenditure. In contrast, Keynes hypothesis accepts public expenditure as an external policy tool that affects real GDP growth. In this study, analyzes are carried out using real GDP as the independent variable and public expenditures (military, education, health, subvention and transfer, investment expenditures) as the dependent variable. The effect of total public expenditures and sub-headings on growth has been analyzed using separate models. In the study covering the years 2000-2019 for 37 OECD countries, annual data on variables were obtained from the World Bank and OECD official databases. According to the results obtained in this study, in which it is desired to determine whether the Wagner Law or the Keynesian view is valid for the selected country group, it has been found that the Wagner Law is valid for some countries and the Keynesian view is valid for some countries.
Primary Language | English |
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Journal Section | Articles |
Authors | |
Publication Date | August 31, 2021 |
Published in Issue | Year 2021 Volume: 7 Issue: 2 |
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