Wagner's Law and the Expanding Public Sector in Saudi Arabia

Abstract

The growth of public sector spending has been a subject of extensive theoretical and empirical investigation. One of the theoretical explanations that have been advanced is Wagner's Law which has been used to analysis the relationship between aggregate income and public expenditure. Thus, studies on this subject have been conducted for the validity of this law in the cases of developed and less developed countries. The validity {If Wagner's Law in the case of Saudi Arabia is tested using aggregated and disaggregated public expenditure data for the period 1964-1998. The methodology employed is that of cointgration and the related error correction models. Results reported here suggest the existence of Wagner's Law in the case of Saudi Arabia. These results are in agreement with the findings of recent studies by researchers interested in this subject.