Panel data, cointegration, causality and Wagnerʹs law: Empirical evidence from Chinese provinces

This paper tests Wagnerʹs law of increasing state activity using panels of Chinese provinces. The paperʹs main methodological contribution is in that we employ for the first time in the literature on Wagnerʹs law a panel unit root, panel cointegration and Granger causality testing approach. Overall, we find mixed evidence in support of Wagnerʹs law for Chinaʹs central and western provinces, but no support for Wagnerʹs law for the full panel of provinces or for the panel of Chinaʹs eastern provinces.