Introduction: During the last decennaries many inquiries have been raised by economic experts about the relationship between authorities outgo ( GE ) and gross domestic merchandise ( GDP ) . Which of these variables is the dependent variable and which one is the independent variable in this relationship? or it is a bidirectional relationship? And what is the type of this relationship, is it positive or negative? Wagner ‘s hypothesis is the most of import hypotheses which suggested replies to these inquiries. . Wagner ‘s hypothesis was advanced in the late nineteenth century by the German economic expert Adolph Wagner. It asserts that as a state ‘s degree of development additions so does the comparative size of its public sector. In modern footings, Wagner ‘s hypothesis is normally interpreted as claiming that the income snap of the demand for authorities outgo exceed integrity ( Koop and Poireir 1995: 123 ) . “ This “ jurisprudence ” reflects the importance of authorities activity and outgo as an inevitable characteristic of a progressive province ” ( Al-Hakami, 1999: 105 ) . The jurisprudence predicts that the development of an industrial economic system will be accompanied by an addition in the portion of public outgo in gross national merchandise as a natural effect of increasing demands of the fabrication sector in peculiar, and the society in general. Hence, the causing tally from gross domestic merchandise ( GDP ) to authorities outgo ( GE ) while harmonizing to Keynesian hypothesis, the causing is expected to run from GE to GDP ( Demirbas,1999: 12 ) . On the other manus, Wagner assumes that economic growing motivates the authorities to pass more and that opposed to Keynesian theory which supposes that increasing the authorities disbursement motivates the economic growing.

Wagner jurisprudence has captured the involvement of both bookmans and political economic experts over 100 old ages. As a consequence, different empirical surveies have tested Wagner hypothesis utilizing assorted methodological analysiss and have yielded conflicting consequences. Some surveies have found support, for illustration: Abizadeh and Yousefi ( 1988 ) , Asseery and Perdikis ( 1999 ) , Thornton ( 1999 ) and Al-Hakmi ( 2000 ) . Studies that have found grounds against Wagner ‘s Law include: Wagner and Weber ( 1977 ) , Afxentiou and Serletis ( 1991 ) , Bairam ( 1992 ) and Demirbas ( 1999 ) . Three conditions should be contributing to Wagner ‘s jurisprudence: a period of growing, industrialisation and modernisation of the economic system ( Sideris 2006: 1 ) .

The chief aim of the survey would be to analyze the relationship between the authorities outgo and GDP in Syria Arab Republic over the period 1960-2007, fundamentally in the long tally by analyzing statistically the causal relationship between both of them. Then, more attending will be to prove Wagner ‘s paradigm because “ Wagner ‘s jurisprudence is frequently considered to stand for a long-run relationship between authorities disbursement and national income in states which are in the early phases of the development ” ( Abizadeh 1985: 214 ) while Keynesian paradigm is largely short tally. In this paper, 1960 will be taken as the starting point because the Syrian authorities applied five old ages program ( FYP ) since so. And in 1970 the Syrian authorities applied a new financial policy to better the economic public presentation by increasing the authorities outgo in different sectors like instruction, wellness services, and substructure. The authorities portion of existent GDP per capita ( RGDPL ) , was ( 17.72 % ) in 1968 than decreased in 1969 to ( 15.75 % ) by 1970 ( when the new policy was applied ) it had increased to ( 23.83 % ) . Hence, this paper test the effectivity of authorities outgo as an of import tool in financial policy in Syria during the period from 1960 to 2007 by proving the being of Wagner ‘s hypothesis.

## Section 2

## THEORETICAL BACKGROUND AND LITERATURE REVIEW

This subdivision presents both the theoretical background ( 2.1 ) every bit good as empirical grounds ( 2.2 ) . The first subdivision includes two parts. The first portion is the authorities outgo and GDP relationship theories which focuses on casualty way in authorities outgo and GDP relationship in both macroeconomic theories and public finance surveies. Then, the 2nd portion goes through the assorted functional signifiers which have been used to depict Wagner ‘s hypothesis. The 2nd subdivision ( 2.2 ) shows empirical grounds of Wagner ‘s jurisprudence. Several empirical surveies have tested Wagner hypothesis utilizing assorted methodological analysiss. Hence, in this paper more attending will be for the methodological analysiss have been used by economic experts to prove Wagner ‘s jurisprudence.

## 2.1-Theoretical background

## 2.1.1- The authorities outgo and GDP relationship theories

The function of authorities outgo on economic public presentation take attending in both macroeconomic theories and public finance literature. Two different theories in macroeconomic have been advanced to analyze the consequence of alteration in authorities outgo on concern rhythm. The first theory is the Keynesian theory. Keynesian analysis uses the multiplier consequence to demo how the increasing of authorities outgo affects on the economic growing. The increasing of authorities outgo increases the demand, therefore boosts the production, the labour demand and existent income because the inflexibleness of goods monetary values. On other words, when the authorities rises the outgo, really it injects a buying power into the economic system, therefore motivates the houses to increase the production ( Linnemann and Schabert 2003:911 ) .

The 2nd theory is the neoclassical theory. Harmonizing to which the increasing of authorities disbursement decreases the ingestion by the negative wealth consequence, along with an addition in labour supply, therefore raising end product and employment while take downing rewards ( Bouakez and Rebei, 2007: 954 ) .

This analyses of the consequence of increase authorities outgo is different from Keynesian analyses.

While the neoclassic analyses due the GDP growing induced by authorities outgo to increase the houses ‘ net incomes caused by the decreasing rewards, the Keynesian analyses due it to increase the buying power which rises the corporations gross revenues.

Although, the anticipations of the neoclassical general equilibrium theoretical account are straight opposed to those of Keynesian theory with regard to some of import variables like rewards and private ingestion but the both theories argue that an addition in authorities outgo while addition the end product ( Linnemann and Schabert, 2003 ) .

In drumhead, Singh and Sahni ( 1984: 630 ) write: macroeconomic theories, basically Keynesian theory, “ have treated with authorities outgo as an exogenic policy instrument used to rectify short-run cyclical fluctuations in sum outgos ” , most peculiarly in the depression periods.

Than the causing tally from authorities outgo ( GE ) to gross domestic merchandise ( GDP ) and that is known as ( Keynesian attack ) .

On the other manus, Wagner ‘s jurisprudence of spread outing provinces outgos is the most interesting hypothesis in the Public finance surveies which test the relationship between authorities outgo ( GE ) and ( GDP ) .

Wagner hypothesis suggests that authorities outgo ( GE ) increases at faster rate than GDP. For this is called Wagner ‘s jurisprudence of spread outing provinces outgos.

From this position, Wagner saw three factors which would do province activity to turn proportionally faster than other sector of the economic system. First, since the economic growing associated with utilizing high engineering in production procedure along with increasing the labour division which push the authorities to spread out the disbursement on disposal, jurisprudence and order.

Second, economic growing would take to an addition in cultural and public assistance services basically the instruction. Third, the increasing graduated table of technologically efficient production would do that the authorities engagement would be required to supply the capital financess to finance large-scale undertakings required to fulfill the technological demands of an industrialized society which the private sector would be no longer capable to run into ( Diamond, 1977: 37 ) .

“ In other words, Wagner ‘s jurisprudence states that authorities grows because there is an increasing demand for public goods and for the control of outwardnesss ” ( Sideris, 2007: 2 ) .

So harmonizing to this hypothesis the causing tally from gross domestic merchandise ( GDP ) to authorities outgo ( GE ) .

In decision, “ Public finance surveies, following Wagner, have considered public outgo as a behavioral variable ” ( Demirbas, 1999: 12 ) . On other words, “ Wagner positions public disbursement as an endogenous factor, which is determined by the growing of national income ” ( Dogan, 2006: 49 ) . And that explain why casualty way opposed to Keynesian hypothesis which suppose that public outgo exogenously given.

## 2.1.2-Functional signifiers of Wagner ‘s jurisprudence

Assorted functional signifiers had been used to depicting Wagner ‘s jurisprudence because several different placeholders can be used for authorities outgo and GDP ( Ram, 1987: 194 ) .

The most common functional signifiers of the jurisprudence cited in the literature are as follows ( see Halicioglu 2003 and Mann 1980 ) :

## 2.1.2.1- Functional signifier 1

GE = degree Fahrenheit ( GDP )

This signifier is referred as the Peacock-Wiseman ( 1961 ) traditional version, where it is postulated that authorities outgo increases at a faster rate than GDP.

## 2.1.2.2-Functional signifier 2

GCE = degree Fahrenheit ( GDP )

Where GCE is the authorities ingestion outgo. This preparation was ab initio used by Pryor ( 1968: 451 ) . Harmonizing to this version, the portion of public ingestion outgos in the national income additions during the economic growing period.

## 2.1.2.3-Functional signifier 3

GE/GDP = degree Fahrenheit ( GDP )

This signifier represents the modified version of Peacock-Wiseman ( 1961 ) and was besides

adopted by Mann ( 1980 ) .

## 2.1.2.4-Functional signifier 4

GE = degree Fahrenheit ( GDP/N )

This signifier is linked to Goffman ( 1968 ) . Goffman thought is that during the growing period, an addition must happen in the activities of the populace sector, and when converted into outgo footings, would transcend the rate of addition in end product per capita ( Goffman, 1968: 359 ) .

## 2.1.2.5-Functional signifier 5

GE/N = degree Fahrenheit ( GDP/N )

This signifier represents Gupta ‘s ( 1967 ) version and was besides adopted by Michas ( 1975 ) , to back up Wagner ‘s jurisprudence harmonizing to this version the snap of authorities outgo per capita with regard to GDP per capita must be greater than integrity.

## 2.1.2.6-Functional signifier 6

GE/GDP = degree Fahrenheit ( GDP/N )

This signifier is a Musgrave ( 1969 ) version, which argues that, the ratio of public outgo to GDP is a map of per capita income. Hence, when the per capita income additions, the populace sector portion of GDP must increase ( Wahab, 2004: 2128 ) .

This survey uses all the functional signifiers except the 2nd signifier ( Pryor ( 1968 ) ) because the available informations of public ingestion expenditures GCE available from 1975 while the survey covers the period from 1960 to 2007.

## 2.2 Empirical grounds of Wagner ‘s jurisprudence of spread outing province outgo

Wagner ‘s jurisprudence of over-increasing province enlargement was derived from the historical experience of Continental Europe, chiefly Germany, at the early phases of industrialisation.

Earlier version of Wagner ‘s Law, Peacock-Wiseman ( 1961 ) traditional version, have assumed that the several clip series are stationary and proceeded to gauge the following relation between authorities outgo and GDP:

GEt =I± + I? GDPt aˆ?+ et

Where I? snap coefficient and Supporting Wagner ‘s Law requires that I? & gt ; 1 ( Musgrave, 1969: 74 ) .

An illustration for such sort of surveies is Al-Hakmi ( 2000 ) . The chief aim of this survey is proving the causal relationship between authorities outgo and gross domestic merchandise, Wagner against Keynesian in Saudi Arabia over the period 1965-1996 by utilizing clip series analysis.

The authorities owns the oil sector, which has an of import influence on the Saudi Arabia economic system through the authorities outgo variable. Although, this fact give an grounds of cogency of the Keynesian hypothesis, but the consequence of the survey really back up Wagner ‘s hypothesis.

The survey does include two stairss. The first measure is to look into if there is a relationship between authorities outgo and GDP by utilizing unit root trial and the cointegration trial which shows that the two clip series are cointegrated. This means there is a long tally relationship between both variables.

The 2nd measure is to find the way of the causal relationship between the variables. The survey supports Wagner ‘s hypothesis because the casualty trial indicates a unidirectional causing running from GDP to authorities outgo.

Thornton used the same methodological analysis in 1999 to prove Wagner ‘s jurisprudence for six developed economic systems ( Denmark, Germany, Italy, Norway, Sweden, and the United Kingdom ) but utilizing informations which begin around the center of the nineteenth century when the size of authorities was comparatively little by modern criterions but increasing. A individual equation theoretical account is used in this trial:

ln ( g ) = a + I? ln ( Y ) + ( 1- I? ) ln ( POP ) + Aµ

where g represents existent authorities outgo, Y is existent income, POP is population size and Aµ is a serially uncorrelated random perturbation term. Granger-causality trials suggested that unidirectional causality ran chiefly from income to authorities outgo, or was bidirectional ( Italy and United Kingdom ) and there appears to be considerable support for Wagner ‘s jurisprudence in Europe the nineteenth century.

Some surveies have been use disaggregated informations because “ non all outgo is needfully a map of national income and some of it may in fact be carried out with a position to bettering national income in the hereafter ” ( Asseery, Law and Perdikis, 1999: 43 ) The paper of Asseery and Perdikis ( 1999 ) is one of this surveies. This paper tested Wagner ‘s jurisprudence in Iraq by utilizing the information covering the period 1950-1980.

Disaggregated informations have been used in this survey by divided authorities outgo by economic class and by major map and so tested the relationship between national income and each constituent parts of authorities outgo. The trials showed that when income and several signifiers of outgo are denoted in nominal footings, unidirectional causality ran chiefly from income to authorities outgo. This support the being of Wagner ‘s Law but the causality runs in the opposite way when outgo denoted in existent footings. Merely in the instance of disbursement on economic services, there is unidirectional causality in both instances, existent and nominal.

All mentioned above surveies tested the hypothesis for individual state while there are other surveies examined it for a group of states like Abizadeh and Gray survey in 1985. They tested Wagner ‘s jurisprudence against pooled time-series, cross-section informations for 53, sampled cover the 17 twelvemonth period from 1963 to 1979, states grouped into hapless, developing, and developed states by agencies of the Physical Quality of Life Index. Wagner ‘s jurisprudence was tested for each group in a theoretical account associating the growing of authorities outgos to several steps of economic development ; existent per capita GDP ( YRP ) , agricultural ratio ( AR ) , openness ( OP ) , entire commercial energy ingestion per capita ( ENP ) and fiscal mediators ( FI ) .

The operational theoretical account was used in the trial as follows:

G = I± + I?1 ( T ) + I?2 ( YRP ) it – I?3 ( AR ) it + I?4 ( ENP ) it + I?5 ( OP ) it – I?6 ( FI ) it

Where I = figure of states

T = figure of old ages

G = Government Expenditure Ratio: entire authorities outgo in twelvemonth T divided by GDP in twelvemonth T, the original paper usage ER alternatively of G.

Wagner ‘s hypothesis is found to keep for the developing group of states, but non for the hapless, or for the developed groups. Actually, for the developed group a negative relationship between the authorities outgo and economic development is observed, for all states together the consequences are less convincing. Which means that Wagner ‘s jurisprudence is weaker than for the developing group ( Abizadeh, 1985 ) .

Finally, some economic experts like Demirbas ( 1999 ) used assorted functional signifiers depicting Wagner ‘s jurisprudence to analyze the being of Wagner ‘s jurisprudence. Demirbas used informations for Turkey over the period 1950-1990. The cointegration trial consequences indicated that the variables are non cointegrated. Thus, no long-term relationship between public outgo and GNP found in Turkey instance. Equally good as, Granger causality trials indicated neither variable Granger causes the other. So, there is no grounds to back up either Wagner ‘s Law or Keynes ‘ hypothesis. In other words, harmonizing to Demirbas ” the increasing of public outgo in the instance of Turkey is non straight dependent on and determined by economic growing ” .

Two chief points can be drawn from reexamining old surveies which mentioned above. First, most surveies, which tested Wagner ‘s hypothesis, have applied the same methodological analysis with different placeholders of authorities outgo and GDP. This methodological analysis described in subdivision 3 includes three basic trials i- stationary trial ii- cointegration trial iii- Granger Causality trial. Second, there is no statement among the economic experts about the cogency of Wagner ‘s hypothesis. Indeed, it is hard to foretell the result of this hypothesis survey for developing states because each one is considered as a particular instance.

## Section 3- METHODOLOGY

This subdivision contains of four parts which present the methodological analysis of survey. The first portion ( 3.1 ) goes through the statistical trials used to gauge the relationship between authorities outgo and gross domestic merchandise while the 2nd portion ( 3.2 ) describes the informations used in this survey. The 3rd portion ( 3.3 ) relates in the empirical techniques. Finally the 4th portion ( 3.4 ) explains the restriction of survey.

## 3.1 Econometricss trials

Three trials have been use to analyze the relationship between GE and GDP. The first trial is stationary trial to find the order of integrating of each series. Then, the cointegration trial which shows if there are a long tally relationship between the variables. The concluding trial is the casualty trial to find the way of the causal relationship between the variables.

These trials apply for five celebrated functional signifiers depicting Wagner ‘s hypothesis. A diagram summarizes these trials at the terminal of this portion.

## 3.1.1 Stationarity trial ( Unit root trial )

A series yt is said to be integrated of order vitamin D, denoted I ( vitamin D ) , if vitamin D is the figure of times the series must be differenced to accomplish stationarity ( Al-Hakmi, 2000: 107 ) . Harmonizing to the above definition, when vitamin D =0, the series yt is stationary in degrees of its values, and when vitamin D =1 it is the alteration in the degrees from one clip period to the following that is stationary ( Vinod, 1997 ) . An I ( 1 ) besides indicate the series contains one unit root. One formal trial for the hypothesis that the clip series is an I ( 1 ) involved an augmented Dicky-Fuller ( 1979 ; 1981 ) ( ADF ) . The undermentioned equations are estimated for each of the clip series

( 1 )

Where I” is the first difference operator Y is the series being tested, and K is the figure of lagged differences included to capture any autocorrelation ( Ho, Wei and Wong, 2004: 12 ) . The nothing and alternate hypotheses may be written as,

H0: I?0 = 0 ( the series is non stationary and needs to be differenced to do it stationary )

H1: I?0 & lt ; 0 ( the series is stationary and does n’t necessitate to be differenced )

## 3.1.2 Cointegration trial

If the several series are difference stationary with the same order, the following measure estimates a cointegrating arrested development associating the degrees of the two series. The cointegration is a survey of the behavior of additive combinations of clip series. Thus, when the two series are cointegrated, this means there is a long tally relationship between the variables. “ However, to back up Wagner ‘s Law would necessitate unidirectional causality from income to public outgo. Therefore cointegration should be seen as a necessary status for Wagner ‘s Law, but non sufficient ” ( Demirbas, 1999: 1 ) . Assuming that the original variables in the cointegration equation are integrated of order K, cointegration among these variables requires that the remainders must be found integrated of order Q where qk ( Ansary, 1993 ) . To set up the stationarity of the remainders the undermentioned equation is estimated:

GE = I±0 + I? RGDPL + Aµt ( 2 ) Then, DF/ADF trial is applied to the remainders from equation ( 3 ) , as follows: ( 3 )

H0: I¦ = 0 ( the series remainders are non stationary/series are non cointegated / )

H1: I¦ & lt ; 0

If we reject the void hypothesis, the cointegration is found to be between the variables, this mean there are along run relationship between variables, so either unidirectional or bidirectional causality must be in the variables.

## 3.1.3- Testing for causality

This trial includes two instances harmonizing to the cointegration trial consequences:

## I- Granger Causality trial ( If the two series cointegrated ) :

Granger causality trial is the appropriate trial to analyze the being and way of causality between the incorporate variables. Two hypotheses exists about the way of causality between authorities outgo and GDP. While Wagner in 1883 argued that causality runs from economic growing to authorities outgo, Keynesian position postulates that the causality runs from authorities outgo to economic growing ( Samudram and Nair, 2009 ) . The arrested development used to analyze the causality are:

( 4 ) ( 5 )

where in equations 4 and 5 is zero-mean serially uncorrelated, changeless discrepancy residuary term. Equation ( 4 ) is used to prove Wagner ‘s hypothesis ( causality runs from GDP to GE ) , where equation ( 5 ) is used to analyze Keynes hypothesis ( causality runs from GE to GDP ) . The void hypothesis that GDP does non Granger do authorities outgo is rejected if the coefficients, , in equation ( 4 ) are jointly important, based on a standard F-test. Likewise, the void hypothesis that authorities outgo Granger- causes GDP is rejected if the coefficients, in equation ( 5 ) are jointly important ( Al Hakami ; 1999: 109 ) .

Four findings are possible in a Granger causality trial: ( I ) neither variable “ Granger causes ” the other. ( two ) unidirectional causality from GDP to GE: That is, GDP causes GE, but non frailty versa ( in this instance Wagner ‘s Law applies ) ; ( three ) unidirectional causality from GE to GDP: That is, GE causes GDP, but non frailty versa ( Keynesian modeling is valid in that instance ) ; ( four ) GDP and GE “ Granger cause ” each other. If ( four ) is found to be true, there is a feedback consequence ( or bilateral causality ) between two variables So neither the Keynesian or Wagnerian attack is valid ( Demirbas, 1999: 16 ) .

## II- Vector car arrested development trial ( VAR ) ( If the two series are non cointegrated ) :

If the two series are non cointegrated which means rejecting the Wagner ‘s hypothesis because no long tally relationship between authorities outgo and GDP but with a opportunity to turn out Keynesian hypothesis which applied in short tally. Hence, in this instance we examine the short-term linkages between authorities outgo and GDP. Thus we will prove Causality utilizing Granger Causality trial but for the GDP and GE growing, lets denoted as a?†GE and a?†GDP, alternatively original clip series ( GE and GDP ) . The Granger causality trial consequences obtained by vector car arrested development ( VAR ) attack, because no cointegration between variables ( Biswal ; 1999: 1288 ) . So we will replace the equations ( 4 and 5 ) in equations ( 7 and 8 ) as follow:

( 6 )

( 7 )

If the coefficients, , in equation ( 6 ) are important, based on a t-test this mean that the casualty tally from a?†GDP to a?†GE but that is non plenty to back up Warner ‘s hypothesis because this relation in short tally. On the other manus, if the coefficients, ,in equation ( 7 ) are important that mean the casualty tally from a?†GE to a?†GDP. This consequence support Keynesian hypothesis.

After applied VAR test we can make Granger Causality trial ( like in instance I ) to back up VAR trial consequences.

This diagram summarizes the econometrics trials, the trial consequence in parentheses ( ) .

Trials for unit roots

( The same order of integrating )

Trials for Cointegration

( the series are cointegrated ) ( the series are non cointegrated )

Trial for Causality /Granger Causality trial / Test for Causality / VAR Causality trial /

( unidirectional causality run from ( unidirectional causality run from

GE to GDP ) a?†GDP to a?†GE )

Supporting of Wagner ‘s hypothesis Supporting of Keynesian hypothesis

3.2-Data The series are downloaded from Penn World Table PWT 6.3 ( 189 states, 1950, 2007, 2005 as basal twelvemonth ) . The one-year information for variables, RGDPL Real GDP per capita, KG Government Share of Real GDP per capita ( RGDPL ) and Population ( POP ) , are choose covering the period 1960-2007 in Syria Arab Republic ( in this paper GDP/P is used to mention to Real GDP per capita alternatively RGDPL ) . Harmonizing to Kennedy, it is utile to utilize one-year informations because “ the power of unit root tests depends much more on the span of the informations, ceteris paribus, than on the figure of observations ; i.e. , for macroeconomic informations where long concern rhythms are of importance, a long span of one-year informations would be preferred to a shorter span with, say, monthly informations, even though the latter instance may hold more observations ” ( Kennedy, 1998: 267 ) .

RGDPL is obtained by adding up ingestion, investing, authorities and exports, and deducting imports in any given twelvemonth. The given twelvemonth constituents are obtained by generalizing the 1996 values in international dollars from the Geary collection utilizing national growing rates. It is a fixed base index where the mention twelvemonth is 1996 ( Penn World Table 6.1 ( PWT 6.1 ) ) , therefore the appellation ( L ) for Laspeyres.

KG is obtained by spliting each constituent by the RGDPL ( in this paper GE/P is used to mention to alternatively KG where G is the entire authorities outgo and P is population ) . Using one-year informations is appropriate here because authorities disbursement is non really sensitive to seasonal and cyclical fluctuations. Finally, population is from the universe bank Development Indicators 2001.

## 3.3-EMPIRICAL TECHNIQUES AND METHODOLOGICAL ISSUES

Eviews 7 was used to treat the information. The undermentioned trials were carried out:

aˆ? Trials for unit roots of all the series utilizing the Augmented Dickey Fuller trial.

aˆ? Trials for Cointegration between two variables utilizing Johansen cointegration trial.

aˆ? Test for Causality utilizing Granger Causality trial.

aˆ? Test for Causality utilizing VAR Causality trial.

International dollar, is a conjectural unit ofA currencyA that has the sameA buying powerA that theA U.S. dollarA had in theA United States at a given point in clip. . . A Laspeyres monetary value index is computed by taking the ratio of the entire cost of buying a specified group of trade goods at current monetary values to the cost of the same group at base-period monetary values and multiplying by 100.

## 3.4-LIMITATION

The two major restrictions of this survey are limited available informations for the period from 1960 to 1970 and the failing of cointegration trial. We have to handle with the consequences of this survey with cautiousness due to these restrictions

First, all functional signifiers of Wagner ‘s jurisprudence described above used placeholders for entire authorities outgo ( GE, GE/P and GE/GDP ) . Since non all outgo is needfully hold a long tally relationship with GDP, it is helpful to analyze the relation between the authorities outgo constituents and GDP. While the cointegration trial show that the entire GE and GDP series are non cointegrated, which means no long tally relationship between variables, some outgo constituents could be cointegrated with GDP. “ There might be a prejudice introduced by utilizing aggregative authorities outgo informations. It is possible that different constituents of outgo affect existent income in different ways, but when aggregative outgo informations are used these effects might be hard to observe ” ( Dogan, 2006: 54 ) . It was well hard to acquire informations for constituents of outgo since 1960, hence we study merely the aggregative outgo.

Second, the failing of cointegration trial proposed by Engle and Granger because the trial consequences are effected by skip of some variables ( see Abizadeh ( 1985 ) ) , but because the restriction of informations for these variables during the survey period we merely use two variables in all functional signifiers but it is high recommended to utilize more variables to avoid this deficit in cointegration trial.

Although of these restrictions, it is still of import to analyze the relation between the entire authorities outgo and GDP. Actually most empirical surveies use assorted signifiers to therefore two variables to prove Wagner ‘s jurisprudence against Keynes hypothesis.

Abizadeh used many variables in his theoretical account which we explain in the empirical grounds.

## Section 4 – Consequence

The empirical consequences are reported in this subdivision of the paper.

The Augmented Dickey Fuller trial consequences are reported in Table 1.

As it is apparent from the consequences, the Augmented Dickey Fuller trial fails to reject the void hypothesis of unit root in all the variables at 5 % degree of significance, and all variables integrated of order 1, I ( 1 ) . We include a changeless but no tendency. The symbol L denotes to logarithm.

Table 1 Unit root trial on the variables

Variables ADF trial Statistic order of integrating

LGE Level -2.7066

1st difference -4.7970** I ( 1 )

LGE/P Level -2.3529

1st difference -4.8286** I ( 1 )

LGE/GDP Level -1.8260

1st difference -7.3614** I ( 1 )

LGDP Level -1.0466

1st difference -9.3242** I ( 1 )

LGDP/P Level -1.4995

1st difference -9.2485** I ( 1 )

Notes: ** denotes significance at 5 % degree

Hence, the consequences show that all variables have the same order of integrate I ( 1 ) . The same consequences, I ( 1 ) , for ADF trial with tendency and intercept ( See appendix 1 ) . The following measure is proving the cointegration between series harmonizing to the assorted preparations of Wagner ‘s Law. The void hypothesis of the cointegration trial is that the series are non cointegrated. The consequence of cointegration arrested developments and DF/ADF Tests reported in table 2.

Table 2 Cointegration Regressions and DF/ADF Trials

functional Dependent independent Constant Elasticity adjusted ADF ( * ) Critical

Form variable variable Coefficient value**

1 LGE LGDP -4.255 1.1142 0.843 -1.5765 ( 0 ) -3.4925

3 LGE/GDP LGDP 0.349 0.1142 -0.005 -1.5765 ( 0 ) -3.4925

4 LGE LGDP/P -0.833 3.04 0.857 -3.288 ( 0 ) -3.4925

5 LGE/P LGDP/P -4.955 1.4524 0.569 -1.7186 ( 0 ) -3.4925

6 LGE/GDP LGDP/P -0.348 0.4524 0.059 -1. 7186 ( 0 ) -3.4925

*Number of slowdowns ( in parentheses ) were chosen by the Akaike Information Criterion.

** Critical values ( at 5 % significance degree ) .

Table 2 shows that: foremost the 5 % critical values of the Augmented Dickey-Fuller Test are bigger than the deliberate t-values for all tried versions of Wagner ‘s Law. Hence we can non reject the void hypothesis for all instances. which means that there is no long-term relationship between public outgo and GDP in Syria for all tried versions of Wagner ‘s Law. Second, to back up Wagner ‘s jurisprudence the existent income elasticises for non-sharing versions should be greater than integrity, while for sharing versions should be greater than nothing. Hence, both types back uping Wagner ‘s hypothesis, the non-sharing versions ( 1, 4 and 5 ) the Elasticity coefficients exceed integrity, and the sharing versions, the version which use the ratio of authorities outgo to GDP, ( 3 and 6 ) the Elasticity coefficients are greater than zero ( Halicioglu, 2003: 131 ) .

Critical values taken from Cheung, Yin-Wong and Lai ( 1995, P. 279 ) , they use ( MacKinnon, 1991 ) .

Although, the consequences of cointegration trial show no long-term relationship between the variables, but we should taking in history the failing and the deficit of cointegration trial proposed by Engle and Granger.

Harmonizing to Muscatclli and Hurm ( 1992: 13 ) :

“ frequently certain economic variables which one would anticipate to travel together in the long -run do non look to make so, unless other variables are included in the relationship. This illustrates one of the chief jobs with the attack proposed by Engle and Granger ” .

Hence, possibly the consequences of cointegration trial are effected by skip of some variables which measure the economic development like Agricultural Ratio, openness and Commercial energy ingestion per capita ( Abizadeh, 1985 ) . Thus we should cover carefully with this consequences. Taking that in history it still remains of involvement to analyze the short-term linkages between authorities outgo and GDP by utilizing the first difference series which are a stationary series I ( 0 ) , since the original series are I ( 1 ) . The VAR casualty trial used for 2 slowdowns and the trial consequences for functional signifier ( 1 ) reported in table 3:

Table 3 The Results of VAR trials for functional signifier ( 1 )

The independent variable The Dependent variable

a?†GE a?†GDP

a?†GE ( -1 ) 0.12029

[ 1.1433 ]

a?†GE ( -2 ) 0.21801*

[ 2.0608 ]

a?†GDP ( -1 ) 0.08442

[ 0.1974 ]

a?†GDP ( -2 ) -0.09124

[ -0.4569 ]

* denotes significance at 5 % degree aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦ t-statistics in [ ]

The VAR trial consequences indicate that an unidirectional causality run from a?†GE to a?†GDP. That is, a?†GE causes a?†GDP, but non frailty versa. The trial for the others versions give the same consequences ( available in appendix 2 ) . The consequences of Granger Causality trial support our findings in the VAR trial as shown in the table 4:

Table 4 The Results of Granger Causality trials

Functional signifier Null Hypothesis F Values ( 2 slowdown ) Critical value**

1 a?†LGE does non do a?†LGDP 3.311* 3.30

a?†LGDP does non do a?†LGE 0.296 3.30

3 a?†LGE/GDP does non do a?†LGDP 3.63 * 3.30

a?†LGDP does non do a?†LGE/GDP 2.146 3.30

4 a?†LGE does non do a?†LGDP/P 3.311* 3.30

a?†LGDP/P does non do a?†LGE 0.296 3.30

5 a?†LGE/P does non do a?†LGDP/P 3.481* 3.30

a?†LGDP/P does non do a?†LGE/P 2.063 3.30

6 a?†LGE/GDP does non do a?†LGDP/P 3.481* 3.30

a?†LGDP/P does non do a?†LGE/GDP 2.063 3.30

* denotes significance at 5 % degree aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦ **F-critical values at 5 % significance degree

The consequences in Table ( 4 ) indicate that we reject the void Hypothesis that growing authorities outgo does non do GDP growing in all Wagner ‘s Law versions. In the same clip, we can non reject the void hypothesis that GDP growing does non do authorities outgo growing in all versions. In other words, unidirectional causality run from a?†GE to a?†GDP. That is, a?†GE causes a?†GDP and that supports Keynes theory.

Actually that make sense because the Keynesian hypothesis is considered to stand for a short-run relationship between authorities outgo and GDP. And as reference before Keynesian theory treated with authorities outgo as an exogenic policy instrument used by authorities to rectify short-run cyclical fluctuations in sum outgos. The findings of this survey may be interpreted as follow, the Syrian authorities started to use the Five old ages program ( FYP ) since 1960, therefore the authorities put a program every five old ages to make an societal and economic ends, but the basic end for each program is to make a specific growing rate in GDP for illustration for the mark growing for the first FYP program was ( 7.2 % ) , ( 7.2 % ) for the 2nd program and ( 8.2 % ) for the 3rd 1. And the basic tool to make the mark growing rate is the authorities outgo and that explain the relationship in the short term between the alteration in GE and the growing of GDP and the way of casualty in this relation. While the absence of the strategic planning of economic development in the long tally is one of possible grounds to absence of the relationship between authorities outgo and GDP in long tally. More than Wagner ‘s jurisprudence predicts that the development of an industrial economic system will increase the demand for public goods, basically large-scale undertakings required to fulfill the technological demands of an industrialized society and by looking to portion of the fabrication sector in GDP in Syria during the survey period we found fluctuations in this ratio, for illustration it was ( 34 % ) in 1970, ( 30 % ) in1975 and ( 28 % ) in1980. Hence, the fabrication sector did non growing significantly which is one of the three grounds that explain Wagner ‘s hypothesis.

## Section 5

## SUMMARY AND CONCLUSION

This paper tested the relationship between authorities outgo and gross domestic merchandise, particularly being of Wagner ‘s jurisprudence, in Syria Arab Republic over the period 1960-2007, by utilizing clip series analysis. Wagner ‘s jurisprudence refers to the causal relationship run from gross domestic merchandise ( GDP ) to authorities outgo ( GE ) while, harmonizing to Keynesian hypothesis, the causing is expected to run from GE to GDP. . Assorted versions have been used by economic experts in the last decennaries to prove Wagner ‘s jurisprudence, different placeholders used for authorities outgo and GDP. We gave an attending to five versions. . ..The methodological analysis used in this survey included three stairss, the first measure was a stationary trial to find the order of integrating and it has been found that all variables were integrated in order 1, I ( 1 ) . … …

Hence, the consequences show that all the variables have the same order of integrating. The cointegration trial was the following measure. This trial examines the being of a long tally relationship between variables if the two variable are cointegrated this means that there are a long tally relationship between them. The void hypothesis of this trial is that the series are non cointegrated. The findings of this trial shows that we could non reject the void hypothesis ( The variables are non cointegrated ) . Therefore, there is no long-term relationship between the variables. And the including of clip tendencies into the cointegration arrested developments did non alter the consequences either. Harmonizing to this trial consequence, Wagner ‘s hypothesis rejected in Syria over the period from 1960 to 2007. This means that, in the long tally there are no relationship between authorities outgo and gross domestic merchandise in Syria during the period from 1960 to 2007. The absence of the strategic planning of the economic development in Syria during this period is a possible account of this consequence. The weak growing of the fabrication sector is another possible ground to reject Wagner ‘s hypothesis which purportedly will be valid in the instance of the development of the industrial economic system. The industrialisation and modernisation of the economic system are of import conditions to valid Wagner ‘s hypothesis. In this type of economic system, the authorities disbursement responses to the increasing demands of the industry by financing large-scale undertakings required to fulfill the technological demands.

Taking in history the failing and deficit of cointegration trial, we moved to the 3rd measure, the VAR Causality trial which tests the causality short-term linkages between variables. The trial was applied on the first difference series, the growing of authorities outgo and GDP, and non for degrees.

The consequences displayed that there were unidirectional causality run from a?†GE to a?†GDP and this supports Keynesian hypothesis. This means that the alteration in the authorities outgo ( a?†GE ) in Syria during the survey period affected the economic growing, ( a?†GDP ) . A possible account to this consequence is that the Syrian authorities has started to use a five twelvemonth program ( FYP ) since 1960 and it has used authorities outgo as one of the basic tools of the financial policy to make the mark economic growing rate for each program. In add-on, this supports Keynesian theory which dainty governmental outgo as an exogenic policy instrument designed to rectify the short-run cyclical fluctuations in the sum outgos.

We can utilize both hypotheses ; the Keynes and Wager as follow:

Normally, in the short tally the authorities applies an outgo policy to advance the investing and hike the economic growing. Therefore, the authorities outgo is the incentive of the economic growing ( Keynes hypothesis ) . In fact, by clip, the investings addition and accordingly requires an addition in the authorities ‘s disbursement in order to make a proper investing environment. In this instance, the economic growing motivates the authorities disbursement for the long tally ( Wager hypothesis ) .

In Syria instance, the authorities spends to run into the mark economic growing rate for each five twelvemonth program, yet non to do a long tally growing. Therefore, this might be considered as a possible account why we have found a short tally relationship between the authorities outgo and the economic growing, but non for the long tally.

Finally, a utile followup to this survey would be to prove the relationship between the authorities outgo constituents like outgo on the instruction and GDP. In add-on, adding more variables which refer to industrialisation and modernisation in GE and GDP equation could alter the consequences of cointegration trial. So, these surveies are extremely recommended.

## Mentions

– Abizadeh, A Sohrab ; Gray, John. ( 1985 ) , “ Wagner ‘s jurisprudence: A Pooled time-series, cross-section Comparison ” , National Tax Journal, Jun85, Vol. 38 Issue 2, p209-218, 10p.

– Al-Hakmi, Ali. ( 2000 ) , “ A Time-series Analysis of the Relationship between Government Expenditure and GDP in the Kingdom of Saudi Arabia ” , King Saud University, Riyadh.

– Akaike, H. ( 1973 ) , “ Information theory and an extension of the maximal likeliness rule. ” In: Petrov B, Csake F ( explosive detection systems ) International symposium on information theory. Akademiai Kiado, Budapest.

– Asseery, A, Law, D, Perdikis, N. ( 1999 ) , “ Wagner ‘s Law and public outgo in Iraq: a trial utilizing disaggregated informations ” , Applied Economics Letters, 13504851, Jan1999, Vol.6, Issue1.

-Biswal, Bagala ; Dhawan, Urvashi and Lee, Hooi-Yean. ( 1999 ) ; “ Testing Wagner versus Keynes utilizing disaggregated public outgo informations for Canada ” , Applied Economics, 31, 1283-1291.

– Bouakez, Hafedh and Rebei, Nooman. ( 2007 ) , “ Why does private ingestion rise after

a authorities disbursement daze? “ , Canadian Journal of Economics, Vol. 40, No. 3.

## – Cheung, Yin-Wong and Lai, Kon S. ( 1995 ) , “ Lag Order and Critical Values of the Augmented Dickey-Fuller Test ” , Journal of Business & A ; Economic Statistics, Vol. 13, No. 3 ( Jul. , 1995 ) , pp. 277-280.

– Diamond, Jack. ( 1977 ) , “ Wagner ‘s “ jurisprudence ” and the development states, Developing economic systems ” , A p37A 23 pages.

– Demirbas, safa. ( 1999 ) : “ Cointegration analysis-casualty testing and Wagner ‘s jurisprudence: the instance of Turkey, 1950-1990 ” .Department of Economics University of Leicester, Leicester, May 1999.

– Dogan, Ergun. ( 2006 ) , “ Government Expenditure And National Income: Causality Trials For Five South East Asiatic Countries ” , International Business & A ; Economics Research Journal, October 2006 Volume 5, Number

– Engle, R.F. and Granger, C.W.J. ( 1987 ) , ” Co-integration and errorcorrection: A representation, appraisal, and proving ” , Econometrica, 55, 251-76.

– Goffman, ( 1968 ) , “ On the empirical testing of Wagner ‘s jurisprudence: a proficient note ” . Public Finance/Finances Publiques, 3 ( 3 ) , 359-364.

– Halicioglu, Ferad, “ Testing Wagner ‘s jurisprudence for Turkey 1960-2000 ” , Rev. Middle Eest Econ. FIN. , August 2003, Vol. 1, No. 2, 129-140.

– Holmium, S. Lok, Hei, Xiangdong and Wong, Wai ; ( 2004 ) , “ The Effect of Outward Processing Trade on Wage Inequality: The Hong Kong Case ” . Lingnan University, Hong Kong.

– Jfk, P. ( 1998 ) . “ A Guide to Econometrics ” . 3rd edition. Blackwell.

– Koop, Gary ; Poirier, Dale J, ( 1995 ) , “ An Empirical Probe of Wagner ‘s Hypothesis by Using a Model Occurrence Framework ” , Journal of the Royal Statistical Society. Series A ( Statistics in Society ) , Vol. 158, No. 1 ( 1995 ) , pp. 123-141.

– Linnemann, Ludger and Schabert, Andreas ( 2003 ) , “ Fiscal Policy in the New Neoclassical Synthesis ” , Journal of Money, Credit and Banking, Vol. 35, No. 6, Part 1 ( Dec. , 2003 ) , pp. 911-929.

– Mann, ( 1980 ) , “ Wagner ‘s jurisprudence: an econometric trial for Mexico, 1925-1976 ” . National Tax Journal, 33 ( 2 ) , 189-201.

– Muscatelli, V. A. and Hurn, S. ( 1992 ) . “ Cointegration and Dynamic Time Series

Models ” , Journal of Economic Surveys, 6 ( 1 ) , 1-43.

– Musgrave. ( 1969 ) , “ Fiscal Systems ” . ( New Haven and London: Yale University Press ) .

– Peacock, and Wiseman, J. ( 1961 ) , “ The Growth of Public Expenditure in the United Kingdom ” ( Princeton: Princeton University Press ) .

– Pryor, F. L. ( 1968 ) , “ Public Outgo in Communist and Capitalist Nations ” ( London:

George Allen and Unwin ) .

– Random-access memory, Rati. ( 1986 ) , “ Causality between income and authorities outgo: a wide

international perspectiveA ” . Public Finance/Finances Publiques, 31 ( 3 ) , 393-413.

-Sahni, B. S. and Singh B. ( 1984 ) . “ On the Causal Directions Between National Income and Government Expenditure in Canada ” , Public Finance, 39 ( 3 ) , 359-393.

– Samudram, Muthi ; Nair, Mahendhiran ; Vaithilingam, Santha, ( 2009 ) , “ Keynes and Wagner on authorities outgos and economic development: the instance of a developing economic system ” , Empirical Economics, Jun, Vol. 36 Issue 3, p697-712, 16p, 8 Charts.

– Sideris, Dimitrios. , ( 2007 ) , “ Wagner ‘s jurisprudence in 19th century Greece: a cointegration

and causality analysis ” , University of Ioaninna.

– Thornton, John, ( 1999 ) , “ Cointegration, causality and Wagner ‘s Law in 19th century Europe “ , Applied Economics Letters, 13504851, Jul99, Vol. 6, Issue 7.

– Vinod, ( 1997 ) , “ Cointegration Notes 1 ” , Class Notes, January 1997.

APPENDIX 1 ( ADF trial with a line drive tendency and an intercept )

Unit root trial on the variables

Variables ADF trial Statistic order of integrating

LGE Level -1.3247

1st difference -5.2538** I ( 1 )

LGE/P Level -1.3918

1st difference -5.1980** I ( 1 )

LGE/GDP Level -1.5653

1st difference -7.6137** I ( 1 )

LGDP Level -2.7816

1st difference -9.3641** I ( 1 )

LGDP/P Level -2.8835

1st difference -9.2038** I ( 1 )

Notes: ** denotes significance at 5 % degree