Public expenditure and deficit in Spain (1958-2014)
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Copyright (c) 2017 Semestre Económico Universidad de Medellín
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Published: September 30, 2016
Abstract
The objective of this study is to analyze a reduced model of the determinants of public spending growth from a demand side perspective. The model is based on the Buchanan and Wagner hypothesis but incorporates several other variables considered as determinants of public spending growth as well. The formulation of two different equations confirmed the influence of deficit on public spending growth during the period 1958-2014. This work provides two contributions to the analysis of public spending determinants in Spain. Firstly, the study period is considerably longer than that of others, and, secondly, unit root and cointegration analysis are used with breakpoints, which, to our knowledge, have not been previously utilized.
References
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Beck, M. (1981). Government Spending. Trend and Issues. New York: Praeger, First edition, 135p.
Bergstrom, T.C. and Goodman, R.P. (1973). Private Demands for Public Goods. In: American Economic Review Vol. 63, No. 3, pp. 280-296.
Borcherding, T.E. (1985). The Causes of Government Expenditure Growth: A Survey of the U.S. Evidence. In: Journal of Public Economics Vol. 28, No. 3, pp. 359-382.
Borcherding, T.E. and Deacon, R.T. (1972). The Demand for Services of Non-Federal Governments. In: American Economic Review, Vol. 62, No. 5, p. 891-901.
Buchanan J. and Wagner, R. (1977): Democracy in Deficit: The Political Legacy of Lord Keynes. Academic Press. New York, 185p.
Courakis, A.S.; Roque-Moura, F. and Tridimas, G. (1993). Public Expenditure Growth. In Greece and Portugal: Wagner´s Law and Beyond. In: Applied Economics, Vol. 25, No. 1, pp. 125-134.
Craigwell, R. (1991). Government deficits and spending in Barbados: An empirical test of the Buchanan-Wagner hypothesis. In: Public Finance, Vol. 46, No. 3, pp. 373-381.
Christopoulos, D. and Tsionas, E.G. (2003). Testing the Buchanan-Wagner hypothesis: European evidence from panel unit root and cointegration tests. In: Public Choice Vol. 115, No. 3, pp. 439-453.
Elliot, G.; Rothenberg, T. and Stock, J. (1996). Efficient Tests for an Autoregressive unit root. In: Econometrica, Vol. 64, No. 4, pp. 813-836.
Fuentes, E. and Barea, J. (1996). El Déficit Público en la Democracia Española. In: Papeles de Economía Española No. 68, pp. 86-191.
Hernández Garcia, G. (1996). La deuda pública en la democracia. In: Papeles de Economía Española No. 68, pp. 214-227.
Hondroyiannis, G. and Papapetrou, E. (2001). An investigation of the public deficits and government spending relationship: evidence for Greece. In: Public Choice, Vol. 107, No. 1-2, pp. 169-182.
Jaén, M. (1999). Gasto público, déficit y cointegración. Un análisis de la hipótesis Buchanan-Wagner en el caso español. In: Hacienda Pública Española Vol. 150, No. 3, p.161-172.
Jaén, M. (2011). Empirical analysis of Wagner´s law for the Spain´s regions. In: International Journal of Academic Research in Accounting, Finance and Management Sciences. Vol. 1, No. 1, p. 1-17.
Jaén, M. and Molina, A. (1997). Un estudio empírico de la ley de Wagner aplicado al caso español. In: Hacienda Pública Española, No. 141-142, pp. 277-285.
Jaén, M. and Molína, A. (1999). Evidencia Empírica Adicional sobre la Ley de Wagner: España 1901-1992. In: Hacienda Pública Española, No. 148, pp. 169-174.
Johansen, S. (1991). Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoagressive Models. In: Econometrica, Vol. 52, No. 6, pp. 1551-80.
Johansen, S. and Juselius, K. (1990). Maximun Likelihood Estimation and Inference on Cointegration-With Applications to the Demand for Money. In: Oxford Bulletin of Economics and Statistics, Vol. 52, No. 2, pp. 169-210.
Johansen, S. and Juselius, K. (1992). Testing Structural Hypotheses in a Multivariate Cointegration Analysis of the PPP and the UIP for UK. In: Journal of Econometrics, Vol. 53, No. 1-3, pp. 211-244.
Johansen, S.; Mosconi, R. and Nielsen, B (2000). Cointegration analysis in the presence of structural breaks in the deterministic trend. In: Econometric Journal, Vol. 3, No. 2, pp. 216-249.
Khan, A. H. (1988). Public Spending and deficits: Evidence from a developing economy. In: Public Finance, Vol. 43, No. 3, pp. 396-402.
Kuckuck, J. (2014). Testing Wagner´s Law at different stages of economic development. In: Finanzarchiv/Public Finance Analysis, Vol. 70, No. 1, pp. 128-168.
Kwiatkowski, D.; Phillips, P.; Schmidt,P. and Shin,Y. (1992). Testing the Null Hypothesis of Stationary against the Alternative of a unit root. In: Journal of Econometrics, Vol. 54, No. 1-3, pp. 159-178.
Legrenzi, G.; Milas, C (2002). The Role of Omitted Variables in Identifying a Long-run Equilibrium Relationship for the Italian Government Growth. In: International Tax and Public Finance, Vol. 9, No. 4, pp. 435-449.
Lilliefors, H (1967). On the Kolmogorv-Smirnov test for normality with mean and variance unknown. In: Journal of the American Statistical Association Vol. 62 pp. 399-402.
Lumsdaine, R. and D. Papell (1997). Multiple trend breaks and the unit root hypothesis. In: Review of Economics and Statistics, Vol. 79, No. 2, pp. 212-218.
MacKinnon, J, G. (1991). Critical Values for Cointegration Tests, Chapter 13. In: R. F. Engle and C. W. J. Granger (eds.), Long-run Economic Relationships: Readings in Cointegration, Oxford: Oxford University Press, 19p.
Ng, S. and Perron, P. (2001). Lag Length Selection and the Construction of unit root Tests with Good Size and Power. In: Econometrica, Vol. 69 No. 6, pp. 1519-1554.
Niskanen, W. (1978). Deficits, Government Spending and Inflation. What is the Evidence? In: Journal of Monetary Economics, Vol. 4, No. 3, pp. 591-602.
Perron, P (1989). The Great Crash, the Oil Price Shock and the Unit Root Hypothesis. In: Econometrica, Vol. 57, No. 1, pp. 215-36.
Perron, P. and Vogelsand, T. J. (1993). The Great Crash, the Oil Price Shock and the Unit Root Hypothesis: Erratum. In: Econometrica. Vol. 61, No. 1, pp. 248-249
Priesmeier, C. and Koester, G. (2012). Does Wagner´s law ruin the sustainability of German public finances? Discussion Paper, No. 8, Deutsche Bundesbank, 48p.
Provopoulos, G.A. (1982). Public spending and deficits: The Greek experience. In: Public Finance, Vol. 37, No. 3, pp. 422-446.
Raymond, J.L. and González-Páramo, J.M. (1988). Déficit, Impuestos y Crecimiento del Gasto Público. In: Papeles de Economía Española No. 37. pp. 125-144.
Schmidt, P. and Phillips, P.C.B. (1992). LM Test for a Unit Root in the Presence of Deterministic Trends. In: Oxford Bulletin of Economics and Statistics, Vol. 54, No. 3, pp. 257-287.
Serrano Sanz, J.M. (1999). Sector Público. Cap. 13. In: J.L. Garcia (dir): Lecciones de Economía Española. Madrid, Ed. Civitas, 4ª ed.
Tridimas, G. (1992). Budgetary Deficits and Government Expenditure Growth: Toward a More Accurate Empirical Especification. In: Public Finance Quarterly, Vol. 20, No. 3, p. 275-297.
Yay, T. and Tastan, H (2009). Growth of Public Expenditures in Turkey during the 1950-2004 Period: an Econometric Analysis. In: Romanian Journal of Economic Forecasting, No. 4, pp. 101-118
Zivot, E. and Andrews, K. (1992). Further Evidence On The Great Crash, The Oil Price Shock, and The Unit Root Hypothesis. In: Journal of Business and Economic Statistics, Vol. 10, No. 10, pp. 251–70.
Beck, M. (1976). The Expanding Public Sector: Some Contrary Evidence. In: National Tax Journal, Vol. 29, No. 1, pp. 15-2.
Beck, M. (1981). Government Spending. Trend and Issues. New York: Praeger, First edition, 135p.
Bergstrom, T.C. and Goodman, R.P. (1973). Private Demands for Public Goods. In: American Economic Review Vol. 63, No. 3, pp. 280-296.
Borcherding, T.E. (1985). The Causes of Government Expenditure Growth: A Survey of the U.S. Evidence. In: Journal of Public Economics Vol. 28, No. 3, pp. 359-382.
Borcherding, T.E. and Deacon, R.T. (1972). The Demand for Services of Non-Federal Governments. In: American Economic Review, Vol. 62, No. 5, p. 891-901.
Buchanan J. and Wagner, R. (1977): Democracy in Deficit: The Political Legacy of Lord Keynes. Academic Press. New York, 185p.
Courakis, A.S.; Roque-Moura, F. and Tridimas, G. (1993). Public Expenditure Growth. In Greece and Portugal: Wagner´s Law and Beyond. In: Applied Economics, Vol. 25, No. 1, pp. 125-134.
Craigwell, R. (1991). Government deficits and spending in Barbados: An empirical test of the Buchanan-Wagner hypothesis. In: Public Finance, Vol. 46, No. 3, pp. 373-381.
Christopoulos, D. and Tsionas, E.G. (2003). Testing the Buchanan-Wagner hypothesis: European evidence from panel unit root and cointegration tests. In: Public Choice Vol. 115, No. 3, pp. 439-453.
Elliot, G.; Rothenberg, T. and Stock, J. (1996). Efficient Tests for an Autoregressive unit root. In: Econometrica, Vol. 64, No. 4, pp. 813-836.
Fuentes, E. and Barea, J. (1996). El Déficit Público en la Democracia Española. In: Papeles de Economía Española No. 68, pp. 86-191.
Hernández Garcia, G. (1996). La deuda pública en la democracia. In: Papeles de Economía Española No. 68, pp. 214-227.
Hondroyiannis, G. and Papapetrou, E. (2001). An investigation of the public deficits and government spending relationship: evidence for Greece. In: Public Choice, Vol. 107, No. 1-2, pp. 169-182.
Jaén, M. (1999). Gasto público, déficit y cointegración. Un análisis de la hipótesis Buchanan-Wagner en el caso español. In: Hacienda Pública Española Vol. 150, No. 3, p.161-172.
Jaén, M. (2011). Empirical analysis of Wagner´s law for the Spain´s regions. In: International Journal of Academic Research in Accounting, Finance and Management Sciences. Vol. 1, No. 1, p. 1-17.
Jaén, M. and Molina, A. (1997). Un estudio empírico de la ley de Wagner aplicado al caso español. In: Hacienda Pública Española, No. 141-142, pp. 277-285.
Jaén, M. and Molína, A. (1999). Evidencia Empírica Adicional sobre la Ley de Wagner: España 1901-1992. In: Hacienda Pública Española, No. 148, pp. 169-174.
Johansen, S. (1991). Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoagressive Models. In: Econometrica, Vol. 52, No. 6, pp. 1551-80.
Johansen, S. and Juselius, K. (1990). Maximun Likelihood Estimation and Inference on Cointegration-With Applications to the Demand for Money. In: Oxford Bulletin of Economics and Statistics, Vol. 52, No. 2, pp. 169-210.
Johansen, S. and Juselius, K. (1992). Testing Structural Hypotheses in a Multivariate Cointegration Analysis of the PPP and the UIP for UK. In: Journal of Econometrics, Vol. 53, No. 1-3, pp. 211-244.
Johansen, S.; Mosconi, R. and Nielsen, B (2000). Cointegration analysis in the presence of structural breaks in the deterministic trend. In: Econometric Journal, Vol. 3, No. 2, pp. 216-249.
Khan, A. H. (1988). Public Spending and deficits: Evidence from a developing economy. In: Public Finance, Vol. 43, No. 3, pp. 396-402.
Kuckuck, J. (2014). Testing Wagner´s Law at different stages of economic development. In: Finanzarchiv/Public Finance Analysis, Vol. 70, No. 1, pp. 128-168.
Kwiatkowski, D.; Phillips, P.; Schmidt,P. and Shin,Y. (1992). Testing the Null Hypothesis of Stationary against the Alternative of a unit root. In: Journal of Econometrics, Vol. 54, No. 1-3, pp. 159-178.
Legrenzi, G.; Milas, C (2002). The Role of Omitted Variables in Identifying a Long-run Equilibrium Relationship for the Italian Government Growth. In: International Tax and Public Finance, Vol. 9, No. 4, pp. 435-449.
Lilliefors, H (1967). On the Kolmogorv-Smirnov test for normality with mean and variance unknown. In: Journal of the American Statistical Association Vol. 62 pp. 399-402.
Lumsdaine, R. and D. Papell (1997). Multiple trend breaks and the unit root hypothesis. In: Review of Economics and Statistics, Vol. 79, No. 2, pp. 212-218.
MacKinnon, J, G. (1991). Critical Values for Cointegration Tests, Chapter 13. In: R. F. Engle and C. W. J. Granger (eds.), Long-run Economic Relationships: Readings in Cointegration, Oxford: Oxford University Press, 19p.
Ng, S. and Perron, P. (2001). Lag Length Selection and the Construction of unit root Tests with Good Size and Power. In: Econometrica, Vol. 69 No. 6, pp. 1519-1554.
Niskanen, W. (1978). Deficits, Government Spending and Inflation. What is the Evidence? In: Journal of Monetary Economics, Vol. 4, No. 3, pp. 591-602.
Perron, P (1989). The Great Crash, the Oil Price Shock and the Unit Root Hypothesis. In: Econometrica, Vol. 57, No. 1, pp. 215-36.
Perron, P. and Vogelsand, T. J. (1993). The Great Crash, the Oil Price Shock and the Unit Root Hypothesis: Erratum. In: Econometrica. Vol. 61, No. 1, pp. 248-249
Priesmeier, C. and Koester, G. (2012). Does Wagner´s law ruin the sustainability of German public finances? Discussion Paper, No. 8, Deutsche Bundesbank, 48p.
Provopoulos, G.A. (1982). Public spending and deficits: The Greek experience. In: Public Finance, Vol. 37, No. 3, pp. 422-446.
Raymond, J.L. and González-Páramo, J.M. (1988). Déficit, Impuestos y Crecimiento del Gasto Público. In: Papeles de Economía Española No. 37. pp. 125-144.
Schmidt, P. and Phillips, P.C.B. (1992). LM Test for a Unit Root in the Presence of Deterministic Trends. In: Oxford Bulletin of Economics and Statistics, Vol. 54, No. 3, pp. 257-287.
Serrano Sanz, J.M. (1999). Sector Público. Cap. 13. In: J.L. Garcia (dir): Lecciones de Economía Española. Madrid, Ed. Civitas, 4ª ed.
Tridimas, G. (1992). Budgetary Deficits and Government Expenditure Growth: Toward a More Accurate Empirical Especification. In: Public Finance Quarterly, Vol. 20, No. 3, p. 275-297.
Yay, T. and Tastan, H (2009). Growth of Public Expenditures in Turkey during the 1950-2004 Period: an Econometric Analysis. In: Romanian Journal of Economic Forecasting, No. 4, pp. 101-118
Zivot, E. and Andrews, K. (1992). Further Evidence On The Great Crash, The Oil Price Shock, and The Unit Root Hypothesis. In: Journal of Business and Economic Statistics, Vol. 10, No. 10, pp. 251–70.
