Federal Legislative Activism in Australia: A New Approach to Testing Wagner's Law

Legislation is an important output of the political process. Growth in legislation can serve as a proxy for growth in the size and role of government, side-stepping some of the endogeneity problems encountered in estimating relationships between government spending and revenue and national income. This paper considers the relationship between government growth and real GDP per capita by developing three models of federal legislative output in Australia since the country's founding in 1901. The models explain growth in (1) the number of acts of parliament; (2) the total number of pages of legislation enacted; and (3) a measure of legislative complexity based on the annual average number of pages per act. The growth in the number of acts is found to be negatively related to growth in real national income per capita in the short-run, implying that legislative output responds to temporary economic shocks, but without a robust long-run relationship with the level of income. The growth in the number of pages of legislation enacted and legislative complexity also show a negative short-run relationship with growth in real national income per capita, but a positive long-run relationship with the level of income that is consistent with Wagner's (1890) law of 'increasing state activity.' However, both the short and long-run relationships are statistically significant only for the post-World War II period, raising questions about the general applicability of Wagner's law.