Abstract
Aim of this study is to identify the existence of Wagner’s Law in Indonesia economy during post-reformation era.
This study takes period sample of five regimes during 1999 – 2011, which are following: a) Development
Reformation Regime; b) National Unity Regime; c) Mutual Cooperation Regime; d) Indonesia Unite I Regime; e)
Indonesia Unite II Regime. In order to test the existence of Wagner’s Law, we also elaborate exogenous variable
(tax revenue and population) as variable control. We find the result that Wagner Law did occur in postreformation era by performing an ARDL co-integration model, yet volatility of government expenditure has to be captured. Hence, we run a GARCH model to estimate the volatility of government expenditure by elaborating the regime variable. The ARDL approach, causality test and co-integration test also support the existing of Wagner Law in this study.
Author: Yudistira Permana & Gek Wika
This paper is published in Journal of Economics and Sustainability Development, vol. 5, no. 10, 2014.