The Wagner's Law

Wagner's Law is a wellknown controversy of the relevant literature introduced by the German economist Adolph Wagner in the 1880's. It states that the government activities expand as a result of increases in real income during the industrialization process. There are three main reasons for the increased government involvement. First, government activity increases because industrialization leads to a substitution of public for private sector activity. Second, the government activity increases with the supply of cultural and welfare services. Finally, expanding government activities is related to increases in government interventions to manage and finance natural monopolies. This book analyzes the Wagner's Law for Turkey for the period 1960-2006. Wagner's law is investigated for the total government expenditures as well as for several components of the government expenditures i.e. government current, investment and transfer expenditures. Cointegration analysis is used to test the validity of the Wagner's law. The main conclusion is that the Wagner's law holds for the total government expenditures and for its components in Turkey during the period under consideration.