expenditure•Public expenditureis spending made by thegovernmentof a country on collectiveneeds and wants- such as pension, provision, infrastructure, etc.•Until the 19th century,public expenditurewas limited as laissez faire philosophiesbelieved that money left in private hands could bring better returns.
Theory of Public ExpenditureIncreasing Public Expenditure Why?Wagner’s Law of Increasing State Activities or spending Reference H. L .BHATIA Public Finance Pages 218-225 . and 233-235 Mushgrave and Mushgrave “ Public Finance” pages 41-44Adolph Wagner born in 1835 died in 1917.Wagner is the main protagonist of a specific school of economics and social policy, called "StateSocialism"He examined historical data on expenditure, primarily of Germany.
Significance of the public expenditure theoryTest whether the role of the government is limited as classicists claim•Collected expenditure data of German government and the local government.•Analyzed time series data on expenditure .•It emphasized on thelong term trendrather than short term changes in thepublic expenditure.•He assumed that the economy functions smoothlywithout social disturbances.•This study is unique as the researchers have not done this kind of analysis on expenditure before.
Significance of the public expenditure theory•According to him, there are inherent tendencies for the activities of differentlayers of a government to increase both intensively and extensively (orcoverage).•There exists functional relationship between economic growth public activitiesresulting•Government sector grows faster than the economy.