Public expenditure growth in Greece and Portugal: Wagner's law and beyond

In the tradition of Wagner's law, this study examines the relationship between aggregate income and public expenditures in Greece and Portugal during the years 1958–85. Unlike more conventional specifications, our analysis focuses on the movement of different componenets of public expenditures. Permanent income, relative prices, stabilization policy and socio-political factors emerge as thomain determinants of public expenditures, while the results reveal significant difference in responses to these determinants across components of expenditures and between the two countries.