Wagner versus keynes: Empirical evidence from Turkey’s provinces

Sagdic E. N., ŞAŞMAZ M. Ü., Tuncer G.

Panoeconomicus, vol.67, no.5, pp.657-674, 2020 (SSCI) identifier

  • Publication Type: Article / Article
  • Volume: 67 Issue: 5
  • Publication Date: 2020
  • Doi Number: 10.2298/pan170531001s
  • Journal Name: Panoeconomicus
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, ABI/INFORM, Central & Eastern European Academic Source (CEEAS), EconLit, PAIS International, Directory of Open Access Journals
  • Page Numbers: pp.657-674
  • Keywords: Cointegration, Economic Growth, Granger Causality, Public Expenditures, Wagner’s Law
  • Uşak University Affiliated: Yes

Abstract

Wagner’s law and Keynes’ hypothesis has long been debated in economics. In this paper, we test the income-expenditure hypothesis for eighty-one of Turkey’s provinces for the period 1992 to 2013 using panel data analysis. For this purpose, the validity of these hypotheses is tested by applying recent panel cointegration and causality techniques, allowing for cross-sectional dependence and heterogeneity between regions. Under the presence of cross-sectional dependence and heterogeneity, the level of integration of the variables was tested by means of the cross-sectionally augmented Dickey-Fuller test, the presence of long-run relationship of the variables was tested with the Westerlund-Edgerton Lagrange multiplier bootstrap test, long-run cointegration coefficients were estimated with the Eberhardt-Bond panel augmented mean group method, and finally causality relationship was defined by the Dumitrescu-Hurlin test. The results of this study provide strong support for the validity of Wagner’s law and Keynes’ hypothesis for Turkey.