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This study tests Wagner's law (the tendency for government activities to expand along with economic expansion) for Nigeria using annual time series data between 1970 and 2006. It adopts the bounds test approach proposed by Pesaran et al. (2001 De Vita, G., Endresen, K. and Hunt, L. C. (2005) An empirical analysis of energy demand in Namibia. Surrey Energy Economics Discussion Paper 110. Surrey Energy Economic Centre, Department of Economics, Univeristy of Surrey. Google Scholar) based on unrestricted error correction model (UECM) and Toda and Yamamoto's (1995 Ferris, JS and West, EG. 1996. Testing theories of real government size: US experience, 1959–89. Southern Economic Journal, 62: 537–53. Crossref , Google Scholar) Granger noncausality tests. Empirical results from the bounds test indicate that there exists no long-run relationship between government expenditure and output in Nigeria. In addition, Toda and Yamamoto's (1995 Ferris, JS and West, EG. 1996. Testing theories of real government size: US experience, 1959–89. Southern Economic Journal, 62: 537–53. Crossref , Google Scholar) causality test results show that Wagner's law does not hold for more than the period being tested. Rather we found a weak empirical support in the proposition by Keynes that public expenditure is an exogenous factor and a policy instrument for increasing national income.
Musibau Adetunji Babatunde (Thu,) studied this question.