Estimating the permanent income elasticity of government expenditures: Evidence on Wagner's law based on oil price shocks

• 成果类型: Article
• 署名作者: Brueckner, Markus; Chong, Alberto; Gradstein, Mark
• 署名单位: National University of Singapore; University of Ottawa; Ben-Gurion University of the Negev
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2012.08.002
• 发表日期: 2012
• 页码: 1025-1035
• 关键词: Wagner law; Permanent income elasticity of government spending

摘要

This paper provides instrumental variable estimates of the permanent income elasticity of government expenditures. It uses annual variation in the international oil price weighted with countries' average oil net-export GDP shares as a plausibly exogenous source of within-country variation in countries' permanent income. The short-run estimates of the permanent income elasticity are robust across alternative specifications and are below one: the estimated elasticity coefficients range between 03 and 0.6 and have standard errors of 0.1 and 0.4, respectively. Point estimates of long-run elasticities are somewhat larger but still smaller than unity. The investment component of government spending is found to be more elastic than the consumption component whereas elasticity differences between rich and poor countries are insignificant. (C) 2012 Elsevier B.V. All rights reserved.