An empirical analysis of South Korea's economic development and public expenditures growth
Journal of Socio-Economics
Economists and political scientists have long maintained that there exists a one-way relationship between the size of government and economic growth. That is, it is hypothesized that economic growth is the cause of government expenditure growth and not the other way around. New research, based on the Keynesian paradigm, suggests that the causality runs from growth in government spending to growth in GDP. Concern with causality has spawned a growing body of new research by Landau (1983 and 1986), Kormendi and McGuire (1985), Singh and Sahni (1984), Marsden (1984), Conte and Darrat (1988), and Ram (1986). While some of these studies support the Keynesian paradigm, others find contrary evidence. In this study, we use Korean data to conduct causality tests of Wagner's law. Further, we develop a model consisting of a government growth equation and a GDP growth equation. Again, using Korean data, we estimate these equations and compare the results with those of Wagnerian causality tests. We conclude that the Korean government expenditures have not contributed to economic growth.
Original Publication Date
DOI of published version
Abizadeh, Sohrab and Yousefi, Mahmood, "An empirical analysis of South Korea's economic development and public expenditures growth" (1998). Faculty Publications. 3922.