Empirical Analysis of Wagner’s Law for the Spain’s Regions

In this paper a panel cointegration analysis is made of both overall development of government expenditure and economic growth in the seventeen Spanish regions (comunidades autónomas, in Spanish). Empirical evidence offers us a positive correlation between public expenditure and per capita GDP that is consistent with Wagner’s Law (WL). A long-run elasticity larger than one suggests a more than proportional increase in public expenditure with respect to economic activity. The principal contribution made by this paper is that, for the first time, empirical testing is carried out on WL, in both its static and dynamic forms, using the methods of unit roots and cointegration in panel data.