Wagner's law versus Keynesian hypothesis: Evidence from pre-WWII Greece

In: Panoeconomicus: naučno-stručni časopis Saveza Ekonomista Vojvodine ; scientific-professional journal of Economists' Association of Vojvodina, Band 60, Heft 4, S. 457-472

Abstract

With data of over a century, 1833-1938, this paper attempts, for the first
time, to analyze the causal relationship between income and government
spending in the Greek economy for such a long period; that is, to gain some
insight into Wagner and Keynesian Hypotheses. The time period of the
analysis represents a period of growth, industrialization and modernization
of the economy, conditions which are conducive to Wagner?s Law but also to
the Keynesian Hypothesis. The empirical analysis resorts to Autoregressive
Distributed Lag (ARDL) Cointegration method and tests for the presence of
possible structural breaks. The results reveal a positive and statistically
significant long run causal effect running from economic performance towards
the public size giving support to Wagner?s Law in Greece, whereas for the
Keynesian hypothesis some doubts arise for specific time sub-periods.