Testing Wagner's Law to determine the cause of increased public spending in Algeria for the period 1990-2024, focusing on the Goffman & Musgrave formulas.

Abstract

In this study, we attempted to explain the increase in public spending in Algeria by testing the validity of Wagner's well-known law on Algerian economic data during the period 1990-2024. (It should be noted that the data related to public spending for the years 2022 to 2024 are estimates from the Ministry of Finance and are not final, as their results are subject to budget control laws.) Our objective in this study was limited to verifying the validity of this law through the Goffman and Musgrave formulas, which are among the most important formulas for demonstrating the validity of Wagner's law. Therefore, we used econometric methods, where we measured the causal relationship between Gross Domestic Product (GDP) and Public Spending (EXP). We then used cointegration testing and the Error Correction Model (ECM). The results showed that Wagner's law was confirmed by both formulas. According to Goffman's formula, a one-unit increase in GDP corresponds to a 4.132-unit increase in absolute public spending. Similarly, Musgrave's formula indicates that a one-unit increase in GDP leads to a corresponding increase in absolute public spending. Government spending increased by 1.0331 units.