Please use this identifier to cite or link to this item: https://doi.org/10.1016/j.jpubeco.2012.08.002
Title: Estimating the permanent income elasticity of government expenditures: Evidence on Wagner's law based on oil price shocks
Authors: Brückner, M. 
Chong, A.
Gradstein, M.
Keywords: Permanent income elasticity of government spending
Wagner law
Issue Date: Dec-2012
Citation: Brückner, M., Chong, A., Gradstein, M. (2012-12). Estimating the permanent income elasticity of government expenditures: Evidence on Wagner's law based on oil price shocks. Journal of Public Economics 96 (11-12) : 1025-1035. ScholarBank@NUS Repository. https://doi.org/10.1016/j.jpubeco.2012.08.002
Abstract: This paper provides instrumental variable estimates of the permanent income elasticity of government expenditures. It uses annual variation in the international oil price weighted with countries' average oil net-export GDP shares as a plausibly exogenous source of within-country variation in countries' permanent income. The short-run estimates of the permanent income elasticity are robust across alternative specifications and are below one: the estimated elasticity coefficients range between 0.3 and 0.6 and have standard errors of 0.1 and 0.4, respectively. Point estimates of long-run elasticities are somewhat larger but still smaller than unity. The investment component of government spending is found to be more elastic than the consumption component, whereas elasticity differences between rich and poor countries are insignificant. © 2012 Elsevier B.V.
Source Title: Journal of Public Economics
URI: http://scholarbank.nus.edu.sg/handle/10635/124318
ISSN: 00472727
DOI: 10.1016/j.jpubeco.2012.08.002
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