An Empirical Analysis of the Validity of Wagner’s Law in China A Case Study Based on Gibbs Sampler

Yan Zheng, Jiabai Li, Xiao-Li Wang, Changqing Li

Abstract


This paper presents an empirical analysis on the relationship between the size of Chinese government, as
measured by its annual spending, and the growth rate of the economy. More specifically, it is designed to
examine the applicability of Wagner’s Law to the Chinese economy. The statistics used in this research are
annual time series data on total government spending and gross domestic product covering the period of 1952 to
2007.
Unexpectedly, our empirical results showed no strong evidence in support of the validity of the Wagner’s Law
for Chinese economy. However, our research shows a characteristic of smooth time-varying parameters for the
relationship between Chinese government expenditures and growth rate of GDP

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International Journal of Business and Management   ISSN 1833-3850 (Print)   ISSN 1833-8119 (Online)

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