Working Paper

Wagner's hypothesis: a local perspective

Abstract: Wagner's hypothesis of an expanding public sector as an economy develops is tested using pooled time-series cross-sectional data for U.S. states from 1964 to 1986. Comparing government size among fiscal jurisdictions within a single nation reduces the problems of data comparability and of controlling for cultural and institutional differences that plague the more common international tests of this theory. Our results are inconsistent with Wagner's hypothesis, yielding a negative relationship between public-sector size and output. However, some empirical support is found in the protective services and public welfare components of government activity.

Keywords: Expenditures, Public;

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers (Old Series)

Publication Date: 1992

Number: 9202