Wagner’s Law: An Empirical Analysis with reference to India

Proceedings of The 13th International Conference on Modern Research in Management, Economics and Accounting

Year: 2021


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Wagner’s Law: An Empirical Analysis with reference to India

Vishavdeep Sharma, Ravi Sundaram, and Deepali



The objective of this paper is to examine Wagner’s law validity concerning India for the period 1980−2020. According to Wagner’s Law, as income growth expands, then the public expenditure rises constantly. We test this hypothesis for India. Furthermore, the reliability and validity of our results in terms of statistical and economic conclusions are supported by the extended data set and all the possible diagnostic tests. Our paper applied time-series regression analysis, unit root tests, cointegration techniques, and vector error correction mechanisms. Our results indicate a positive elasticity of growth rate in expenditure with respect to the first difference of per−capita GDP; thus, we found support for Wagner’s hypothesis and contributed to the existing literature with some new modifications in the theoretical model proposed by researchers.

keywords: Wagner’s Law, Time series, Public finance, Applied Econometrics, Economic Development, GDP.