The relationship between government spending and public deficits in Taiwan:Testing the Buchanan-Wagner hypothesis

• Main Authors: Yi-Chun Chen, 陳怡君
• Other Authors: Chien-Chiang Lee
• Format: Others
• Language: zh-TW
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/79000277144581746289

碩士 === 國立中興大學 === 應用經濟學系所 === 96 === This article examines the long-run and dynamic adjusted relationship among government spending, public deficits, income, wages and adult population in Taiwan from 1974 to 2006. I employ the unit root test, Johansen max likelihood tests and vector error-correct model, as well as times series techniques appropriate, to test the effect of deficits or real government spending in long run. Otherwise, we also analyze that an increase per real GDP adds real government spending? If the income elasticity of demand for government services exceeds unity, imply to support Wagner’s Law. In this paper, we find that, first, among above five variables, there is a cointegrated relationship, to indicate there is a long-run equilibrium relationship among these variables. Second, among public deficits and government spending is statistically significant positive relationship, as well as an increase public deficit adds real government spending, and in favor of Buchanan-Wagner hypothesis. Third, an increase per real GDP adds real government spending but income elasticity is less unity, this is to show there is no evidence to advocate Wagner’s Law in Taiwan. Fourth, productivity performance of public sector is lower then private sector in long-run. Fifth, an increase in the adult population reduces the unit cost of supplies public services. In other words scale economies exist in the provision of public sector.