Wagner’s law postulates that an increase in income leads to a more than proportional increase in public expenditure. This important law of public finance which justifies the growth of expenditure or government size has been empirically tested in various environments with different degrees of success. The objective of this paper is to re-examine Wagner’s law in the context of the six countries of the Organisation of Eastern Caribbean States (OECS) – Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines –in the period 1980 - 2014. Using the ARDL approach à la Pesaran et al. (2001), we find that in the long run the more proportionate impact of income on public expenditure holds in Grenada, St. Kitts and Nevis as well as St. Vincent and the Grenadines. In addition, there is some role for natural disasters in influencing Wagner’s law.
Re-examining Wagner’s Law with the Countries of the Organisation of Eastern Caribbean States.pdf