Government Expenditures in the European Union: Do They Converge or Follow Wagner's Law?

This paper examines government expenditure convergence within the expanded European Union. Except for a few cases convergence was generally not validated for government consumption, transfers, subsidies nor for their aggregate, all expressed in constant real per capita terms. Neither was any long run equilibrium relationship found between these categories of expenditures and GDP. Causality tests from GDP to these expenditure categories, in the spirit of Wagner’s law, proved as unsatisfactory as tests of reverse causality. All results indicate that there is room for government expenditure harmonization within the EU provided members are really determined to work toward such objective. [H50] 1.