WAGNER'S LAW: AN ASSESSMENT OF ITS RELEVANT TO NIGERIA’S ECONOMIC DEVELOPMENT
Keywords:Augmented Dickey Fuller, Economic development, Nigeria, Wagner's Law
The study assessed the prediction of Wagner's Law with respect to Nigeria’s economic development. The stationary properties of the time series in public finance data of the Central Bank of Nigeria Annual statistical bulletin (2009) was tested using Augmented Dickey Fuller (ADF) test. Ordinary Least Square (OLS) method of estimation was employed to examine the impact of public expenditure on economic in Nigeria for the period 1960 - 2009. The results revealed the existence of a negative relationship between real government expenditure and real Gross domestic product (-0.045487), which suggested that as real government expenditures increase the entire economy's output performance was decreasing. The results also established that growth in national income led to a slight decrease in government spending which is contrary to Wagner's Law. Out of the three model specifications that were tested, two models indicated that a positive relationship exists between government expenditure and economic growth in the long run. However, the income elasticity was not large enough to suggest that the growth in government expenditure exceeds the growth in national income. It only suggests that the growth in national income exerts upward pressure on the government spending in Nigeria.