the futile quest for a grand explanation of long run government expenditure this paper carries out a critical reappraisal of the two contending theories purporting to explain long run government spending wagner s law and different variants of the ratchet effect we analyze data spanning from the early 19 th century until the present day in sweden and the united kingdom hence in contrast to previous studies we evaluate the validity of wagner s law and the ratchet effect hypothesis over a very long time period starting at the beginning of industrialization cointegration analysis is used to investigate the long run relationships between government expenditure and gdp focusing on sub periods and structural breaks moreover we test the ratchet effect hypothesis by estimating models which allow for asymmetric adjustment according to our main results wagner s law does not hold in the long run although the data are consistent with wagner s law between roughly 1860 and the mid 1970s this can be traced to the formation of the modern public sector including the introduction of public education health care and so forth yet wagner s law did not hold during the initial industrialization phase before 1860 and in recent periods gdp only affects the government spending share when we control for population age structure finally we find some evidence of asymmetric adjustment in the uk particularly in the post wwii period however the ratchet effect is not a general cause of the growth of government spending

an empirical re examination of wagner s law abstract it is argued in this paper that for a more meaningful test of wagner s law allowance must be made in regard to prevalence of peace and stability using six different versions and employing both nominal and real data from ten states of the united states wagner s law is vindicated

growth effects of public expenditure on the state and local level evidence from a sample of rich governments there is a vast empirical literature investigating the relationship between government size and economic growth but the empirical evidence of growth effects of public expenditure using cross country regressions is still inconclusive according to a number of authors this is not surprising since the negative relationship only applies for rich countries with a large public sector restricting their analysis on rich countries only they can show the predicted negative impact naturally a selection of a sub sample of rich countries is always somewhat arbitrary another possibility is to concentrate on governments within a rich country however only few studies investigate the effect of state and local spending on economic growth this study concentrates on the relationship between public expenditure and economic growth within a rich country using the full sample of state and local governments from switzerland over the 1981 2001 period the general finding is a fairly robust negative relationship between gov

a test of the wagner s hypothesis for the fiji islands in this article we examine wagner s law for fiji for the period 1970 to 2002 using the johansen 1988 test for cointegration we find one cointegration relationship between national output and government expenditure using five different long run estimators we find robust results on the impact of national income on government expenditure the elasticity ranges from 1 36 to 1 44 implying that a 1 increase in income leads to a 1 36 1 44 increase in government expenditure moreover we find that in the long run national income granger causes government expenditure while these results are consistent with wagner s law we warn policy makers that because fiji s total debt stands at around 69 of gdp in future the bulk of expenditure will go towards debt financing at the expense of productive sectors

causality between public expenditure and national income this paper deploys the granger method to determine the directions and patterns of causality between national income and total as well as various components of public expenditure empirical results based on the data for india 1950 81 suggest that while at the disaggregate level the causal process is rather diverse it is essentially feed back type at the aggregate level it neither confirms the wagnerian income public expenditure nor the keynesian public expenditure national income view the paper recommends that two variables be treated as jointly dependent in both the public finance and macroeconometric studies

the government expenditure economic growth relation in japan an analysis by using the adl test for threshold cointegration based on annual data from japan for the period 1960 to 2010 we investigate the government expenditure economic growth relation in japan by using the autoregressive distributed lag test for threshold cointegration developed by li and lee 2010 in particular we evaluate the validity of wagner s view and the keynesian view in the case of japan the empirical results presented herein indicate that of these two classical economics perspectives only wagner s view holds for japan the findings also demonstrate that the adjustment process towards its long run equilibrium is asymmetric

co integration and error correction models the temporal causality between government taxes and spending several interesting papers have recently considered whether government taxes granger cause government spending or vice versa the findings based on standard granger 6 causality tests are not consistent manage and marlow 10 conclude that when evidence of one way causality exists federal taxes granger cause federal spending while anderson wallace and warner 1 conclude that the evidence supports one way causality in the opposite direction ram 11 reexamining the issue concludes that taxes granger cause spending at the federal level but that spending granger causes taxes at the state and local level von furstenberg green and jeong 13 in another related article examine the tax and spend spend and tax causality issue using a more general vector autoregressive var model they introduce in addition to federal taxes and spending two economic variables the gnp gap and the inflation rate decompose federal spending into several categories and remove the effects of automatic stabilizers when appropriate they find little evidence that taxes granger cause spending and limited evidence that spending causes taxes a finding which corresponds most closely to that of anderson wallace and warner 1 our purpose is to reconsider the causality issue with the aid of co integration and errorcorrection modeling our analysis illustrates with a specific example how sources of causality can be neglected in standard granger causality tests moreover addressing the question of temporal causality between government taxes and spending provides insight as to how different policies might or might not help control the growth of government the results of our estimating various co integration and error correction models with quarterly data suggest bi directional causality between government taxes and spending both for the federal and state and local sectors this finding counters the conclusions of previous studies when annual data are used however our

estimating the permanent income elasticity of government expenditures evidence on wagner s law based on oil price shocks this paper provides instrumental variable estimates of the permanent income elasticity of government expenditures it uses annual variation in the international oil price weighted with countries average oil net export gdp shares as a plausibly exogenous source of within country variation in countries permanent income the short run estimates of the permanent income elasticity are robust across alternative specifications and are below one the estimated elasticity coefficients range between 0 3 and 0 6 and have standard errors of 0 1 and 0 4 respectively point estimates of long run elasticities are somewhat larger but still smaller than unity the investment component of government spending is found to be more elastic than the consumption component whereas elasticity differences between rich and poor countries are insignificant

lag length selection and tests of granger causality between money and income one of the most widely accepred relationships in macroeconomics is the positive relationship between the rate of growth of the money supply and the rate of growth of income a diversity of opinion arises however with the attempt to identify a causal relationship between these variables while friedman and schwartz 1963 initiated the empirical investigation of money income causality sims 1972 made the most significant contribution to this literature with a practical application of the criterion developed by granger 1969 for identifying a causal relationship since the appearance of sims s approach and an alternative one advanced by sargent 1976 many researchers have applied these techniques to the investigation of the causal relationship between money and income l with two exceptions hsiao 1981 and mcmillin and fackler 1984 these researchers have arbitrarily chosen the lengths of their distributed lags the purpose of this paper is to test for granger causality between money and income this paper differs from previous work in that considerably more attention is focused on the effect of the lag specification on the test results in particular we investigate the extent to which rules of thumb arbitrary lag specifications and

ex ante versus ex post optimal promotion rules the case of internal promotion i introduction the literature on promotion practices within the firm identifies two distinct roles for a firm s promotion policies promotions serve both as a way for the firm to efficiently assign workers to tasks and as a way for the firm to reward prior performance 1 in this article i explore the time inconsistency problem that arises as a result of the dual nature of the promotion decision in particular i show that the common practice of favoring internal candidates for promotion can be understood as a response by firms to the problem of time inconsistency 2 consider a firm in which promotions serve as a reward for prior expenditures of effort and or prior investments in human capital the optimal promotion policy for this firm depends on the time frame from which we view the problem the ex ante optimal promotion rule is the optimal rule when the problem is viewed from a date prior to young workers deciding to work at this firm this rule takes into account both the assignment aspects of the promotion decision and that promotions serve as a reward for prior performance there is a second relevant rule however because at the date of the promotion decision the effects of promotion serving as a reward for prior performance are in the past for example in a world where the possibility of future promotion serves to increase the effort levels of young workers by the time of the promotion decision those effort choices have already been made hence the ex post optimal rule only takes into account the assignment aspects of the promotion decision the time inconsistency problem that arises is now clear total profits are maximized when the firm follows the ex ante optimal promotion rule but in the absence of commitment this is not how the firm behaves at the time of the promotion decision the firm has an incentive to ignore the effects of promotion serving as a reward for prior performance and instead follow the ex post optimal rule in other words the profits of the firm are decreased because at the time of the promotion decision the firm maximizes current profits and the anticipation of this behavior by workers has deleterious effects on behavior in prior periods in this article i explore a specific example of this time inconsistency problem consider a firm s decision concerning whether to fill a managerial position by promotion from within or by hiring an outsider i show that when confronted with this decision the firm faces the exact situation described that is the ex post optimal rule shows no preference for promotion from within over hiring from the outside whereas the ex ante optimal rule exhibits a preference for promoting from within the logic here is that the possibility of receiving the higher managerial wage in the future reduces the wage required to attract young workers into the firm but only the ex ante optimal rule takes this into account the result is that in the absence of commitment the firm hires from the outside too often the conclusion is that the establishment of an internal labor market in which the firm favors promotion from within can be understood as a way that the firm avoids this time inconsistency problem this result extends a finding in malcomson 1984 that article also shows that an internal labor market in which hiring from the outside is restricted can arise in a world where promotion serves as a reward for prior performance in that work however there is no time inconsistency problem the reason is that malcomson assumes workers are homogeneous and thus at the time of the promotion decision it is weakly optimal for the firm to have all promotions be from within in contrast i assume that workers are heterogeneous and find that if the firm maximizes ex post profits it lowers total profits the result is an internal labor market that not only limits hiring from the outside but also constrains the firm to behave in a manner different from that which maximizes profits at the time the promotion decision is made

urban household energy use in tanzania prices substitutes and poverty abstract this paper presents the findings of the tanzanian urban household energy survey undertaken as part of the tanzania urban energy project household energy use varies by income group according to local fuel availability considerable differences between the marginal costs of supplying fuels and market prices paid by consumers have led to major misallocations of resources when the results of this survey are compared to the results of the 1987 household energy survey a significant shift by households toward kerosene and electricity away from fuelwood charcoal and lpg is shown to have taken place these shifts toward modern fuels are consistent with the claims of the households in the 1990 survey and can largely be explained by fuel prices finally an assessment of the lifeline tariff and the kerosene cross subsidy demonstrate that the latter is a more effective method of ensuring the basic energy needs of the urban and rural poor

an econometric test of wagner s law for six countries based on cointegration and error correction modelling techniques the present study empirically examined five different versions of wagner s law by employing annual time series data on six countries over the period 1951 1996 three countries are part of the emerging industrialized countries of asia south korea taiwan thailand and three are industrialized countries japan usa and the united kingdom the analysis is an advance over previous work in two ways first the stationarity propertities of the data and the order of integration of the data are empirically investigated using the augmented dickey fuller adf and the kwiatkowski et al journal of econometrics 1 1992 kpss tests and second the hypothesis of a long run relationship between income and government spending is tested using bivariate cointegrated systems and employing the methodology of cointegration analysis as suggested by johansen journal of economic dynamics and control 12 1988 and johansen and juselius oxford bulletin of economics and statistics 52 1990 the results indicate that

real incomes and the consumption of woodfuels in ghana an analysis of recent trends abstract as in most developing countries woodfuels account for a major share of the energy consumption in ghana the overdependence on woodfuels has grave potential environmental and health hazards so efforts are being made to popularize efficient energy devices namely cookstoves the paper establishes the linkage between the quantity of woodfuels consumed and the level of real incomes and inflation respectively in the country using time series data from 1974 to 1987 a regression analysis indicates that the quantity of woodfuels consumed in the country is negatively and positively correlated to real incomes and inflation levels respectively it is therefore concluded that the impact of real incomes and inflation and the continued overdependence on woodfuels should not be discounted in light of this efforts to introduce and popularize the utilization of efficient energy devices in the country ought to be facilitated by increases in real incomes inflation control measures and improvement in the standard of living of the populace

managerial objectives the r rating puzzle and the production of violent films we analyze project choice in the motion picture industry and find evidence consistent with revenue maximization and excessive hedging we find that movies that are very violent or feature sex and violence do not provide excess returns but they increase revenues particularly in the international market further they tend to lose money less often and their returns are more predictable even though there are never mega hits this evidence is consistent with studies of other industries and it partially explains the r rating puzzle that is the preponderance of r rated films although most studies find that g and pg rated films perform better

sales maximization and specific human capital profit maximizing owners of firms may find it optimal to provide managers with incentives to maximize sales in addition to profits this influences the outcome of the bargaining game between workers and managers over workers wages and helps to solve the problem of underinvestment by workers in specific human capital iinvestigate optimal managerial contracts from this point of view and show that the optimal contract is a function of sales in addition to profits

strategic managerial incentives in a two period cournot duopoly abstract this paper examines the nature of optimal managerial incentives in the context of a duopoly marked by competition between the firm s managers in a dynamic production environment if the marginal cost of production falls moderately over time or remains unchanged there exists an equilibrium where one owner requires her manager to maximize profit whereas the rival owner requires her manager to maximize sales revenue the profit maximizing manager turns his firm into a stackelberg leader while the sales revenue maximizing manager turns his firm into a stackelberg follower further the profit maximizing manager may generate a larger firm profit relative to the sales revenue maximizing manager

a bound testing analysis of wagner s law in nigeria 1970 2006 this study tests wagner s law the tendency for government activities to expand along with economic expansion for nigeria using annual time series data between 1970 and 2006 it adopts the bounds test approach proposed by pesaran et al 2001 based on unrestricted error correction model uecm and toda and yamamoto s 1995 granger noncausality tests empirical results from the bounds test indicate that there exists no long run relationship between government expenditure and output in nigeria in addition toda and yamamoto s 1995 causality test results show that wagner s law does not hold for more than the period being tested rather we found a weak empirical support in the proposition by keynes that public expenditure is an exogenous factor and a policy instrument for increasing national income

the added worker effect abstract this paper uses the gross change data and cointegration error correction modeling to test the hypothesis of added worker effect in the u s labor market it is shown that prime age males unemployment u m and flows from unemployment to out of the labor force un m cause an increase in prime age and young females flows from not in the labor force keeping house to employment and decrease their flows into unemployment

rural residential energy transition and energy consumption intensity in china abstract this paper examines the impact of residential energy transition on residential energy consumption per capita recpc and identifies the underlying drivers in rural china based on province level panel data for years 1991 2014 in rural china it is shown that energy transition from traditional biomass energy tbe to traditional commercial energy tce significantly decreases recpc while energy transition from tbe or tce to advanced commercial energy ace significantly increases recpc as is revealed by the energy stacking model per capita income has a significantly negative impact on recpc and the impact of lagged recpc is opposite due to the regulation of energy price there exists price distortion in china s rural energy market and the price mechanism functions poorly besides factors including juvenile dependency ratio and education level significantly reduce recpc therefore it is vital to integrate rural energy into national energy strategic system facilitate energy transition process and introduce the market system reform of rural energy and continue to improve the education level of rural residents in rural china

wagner s law revisited cointegration and causality tests for new zealand wagner s law states that the share of government expenditure in gross national product gnp will increase with economic development many associated empirical studies substitute gnp with gross domestic product gdp this article presents an empirical investigation into the validity of wagner s law for new zealand over the period 1960 to 2007 and compares the results obtained using these two measures of output application of the autoregressive distributed lag ardl bounds test suggests a cointegrating relationship between either output measure and the share of government spending and further application of general to specific gets engle and granger eg phillip hansen s fully modified ordinary least squares fmols and johansen s time series techniques illustrate statistical robustness and an income elasticity between 0 56 and 0 84 the results suggest that output measures granger cause the share of government expenditure in the long run thereby providing support for wagner s law and these resul

autoregressive modelling and money income causality detection abstract a step wise procedure based on granger s concept of causality and abaike s final prediction error criterion is suggested as a practical means to identify the order of lags of each variable in a multivariate autoregressive process the model seems useful because it can serve as a reduced form formulation to avoid imposing often spurious or false restrictions of the model it also provides a reasonably powerful test of causality the idea is applied to u s postwar money and income data it is found that between m1 and gnp a bivariate feedback model fits the data best between m2 and gnp a one way causal model from money to income performs better diagnostic checks applied to our model seem to indicate the adequacy of our approach

firm leadership and innovative performance evidence from seven eu countries this paper considers the effect of different firm leadership on the innovative performance of firms from seven eu countries we investigate whether owner led or manager led firms achieve a larger share of their turnover with product innovations economic theory does not propose clear answers to this question in the empirical analysis it turns out that the manager led firms are more active innovators the share of sales based on new products is larger if firms managers do not hold any of the firms capital surprisingly there are no differences between the seven countries included in the regression analysis

wagner s law versus displacement effect abstractthe public sector has grown dramatically over the past few centuries in many developed countries in this article we use wavelet methods to distinguish between two leading explanations for this growth wagner s law and the displacement effect in doing so we use the long term data of 10 oecd countries for a maximum time span of 1800 2009 we find that the validity of wagner s law is likely to vary strongly over time for each country a roughly similar feature in most of the countries is that the law is less valid in the earliest stage of economic development as well as in the advanced stages with the validity tending to follow an inverted u shaped pattern with economic development further our results indicate that the long run growth of government size cannot be adequately explained by wagner s law on the other hand the displacement effect appears to account for the bulk of the growth in most of the countries

the provision of incentives in firms i ncentives are the essence of economics despite many wide ranging claims about their supposed importance there has been little empirical assessment of incentive provision for workers the purpose of this paper is to critically overview existing work on the provision of incentives since the interests of workers and their employers are not always aligned a large theoretical literature has emphasized how firms design compensation contracts to induce employees to operate in the firm s interest this literature has reached into many areas of compensation and has pointed to a multitude of different mechanisms that can be used to induce workers to act in the interests of their employers these include piece rates options discretionary bonuses promotions profit sharing efficiency wages deferred compensation and so on my objective here is to evaluate this literature in the light of a growing empirical literature on compensation where possible i will address the literature from two perspectives first an underlying assumption of this literature is that individuals respond to contracts that reward performance accordingly i consider whether agents behave in this way and whether these responses are always in the firm s interest second i address whether firms write contracts with these responses in mind in other words do contracts look like the predictions of the theory incentives are provided to workers

testing wagner versus keynes using disaggregated public expenditure data for canada this paper attempts to test wagnerian versus keynesian hypotheses by examining the relationship between national income and total public expenditure as well as its various components for canada during the period 1950 1995 engle and granger s two step cointegration and error correction techniques are employed to test these two hypotheses the results of this study support both the hypotheses when tested with broader aggregate expenditure data i e total government current expenditure ce and total current expenditures on goods and services cegs although the results of this study do not support the existence of any long run relationship between gdp and the disaggregated public expenditure variables they do support the existence of short run causation implying that national income may be causing or caused by a component of the total government current expenditure in the short run

rural household energy consumption the effects of access to electricity evidence from south africa this paper examines household energy consumption patterns in rural areas in the light of energy transition theories in particular the study aims to identify the effects of access to electricity on fuel choice the analysis uses data from an extensive household survey conducted in south africa and examines the prevalence of different fuels energy expenditure the end uses of fuels and multiple fuel use patterns it is concluded that evidence exists for the presence of an energy transition in rural households largely driven by income access to electricity affects the nature of this transition and there is weak evidence to suggest that it accelerates the process

the layoff rat race we investigate how discretionary investments in general and specific human capital are affected by the possibility of layoffs after investments are made firms may have to lay off workers and will do so in inverse order of the profit that each worker generates greater skill investments especially in specific human capital contribute more to a firm s bottom line so that workers who make those investments will be laid off last we show that as long as workers bargaining positions are not too weak workers invest in specific human capital in order to reduce layoff probabilities indeed workers over invest in skill acquisition from a social perspective whenever their bargaining power is strong enough even though they only receive a share of any investment more generally we characterize how equilibrium skill investments are affected by the distribution of worker abilities within firms the probability that a firm will downsize and the distribution of employment opportunities in the economy

keynes versus wagner public expenditure and national income for three african countries the public expenditure income hypothesis has long been debated in economics following keynes public expenditure is seen as an exogenous factor to be used as a policy instrument to influence growth on the other hand wagner argues that expenditure is an endogenous factor or an outcome not a cause of growth in national income the purpose of this paper is to apply both the granger and holmes hutton statistical procedures to test the income expenditure hypothesis for three african countries ghana kenya and south africa we find that the hypothesis of public expenditure causing national income is not supported by the data for these african countries

short and long term relation between economic development and government spending the role of quality of institutions abstractthis paper tests the wagner s assumption of the one sided directional flow moving from economic growth to public spending considering an international database over the 1996 2012 period by

a time domain transfer function model of wagner s law the case of the united kingdom economy the dynamic relationship which is implied by wagner s law is well established in the literature however the methodology which has been applied to investigate this dynamic relationship has tended to avoid a dynamic specification this paper investigates wagner s law employing transfer function methodology in the time domain for the uk over the period 1946 85

delegation and firms ability to collude abstract in a model of repeated cournot competition under complete information we show that delegation has no effect on cartel stability if managers collude while it may hinder cartel stability when owners collude in setting the incentive schemes if owners can choose whether to delegate or keep control of their respective firms and both groups of individuals collude or play non cooperatively in their respective variables according to the level of intertemporal discount factor then if managers are not able to collude in output levels owners delegation decision is non monotone in the discount factor