Abstract

RODRIGUEZ-BENAVIDES, Domingo  and  LOPEZ-HERRERA, Francisco. Economic Development and Public Spending of the States in Mexico: Analysis of Panel Cointegration and the Wagner's Law. Gest. polít. pública [online]. 2014, vol.23, n.2, pp.299-330. ISSN 1405-1079.

This paper shows evidence about the compliance of the Wagner's Law at the level of the Mexican states during the period 1980-2007. This law sets that the growth of public spending is explained as a result of increased economic activity. To test compliance with the law, this study use the specification proposed by Peacock and Wiseman (1961), Musgrave (1969), and Goffman and Mahar (1971), which sets that public spending and output variables are related in their levels. The bulk of empirical research on the fulfillment of the law at the global level has been conducted investigating whether Wagner's Law is fulfilled in the country level, with few studies on its fulfillment at the level of states, provinces or regions into a country. By means of econometric methods of panel data analysis, the whole set of the states of the Mexican Republic is studied, so as three subgroups classified according to their GDP per capita. The results of the cointegration analysis suggest evidence in favor of compliance with the Wagner's Law in the study period and that compliance is a function of the level of development achieved by the states.

Keywords : Wagner's Law; state development; panel cointegration.