Education spending and Wagner's law: New international evidence

Abstract

This paper examines the association between economic development and two measures of public spending on education, namely the 'national effort' (total spending as a percentage of GDP) and 'budget share' (total spending as a percentage of total government spending). Using data for a large sample of countries from 1989 to 2015, we illustrate a novel application of Wagner's law. We compare mean levels of national effort and budget share measures for economically and politically distinct groups of countries. We find that the signs of the associations between the level of economic development and the two education spending measures differ. This implies that richer countries have larger public sectors than do poorer countries, consistent with Wagner's Law. The findings are summarized in the form of three inequality propositions about the national effort, budget share and size of government for richer versus poorer countries. In addition, for comparable levels of economic development, democratic countries tend to spend more on education than is the case for their non-democratic counterparts.