Public Expenditure Growth in Greece and Portugal: Wagner's Law and Beyond

In the tradition of Wagner's law, this study examines the relationship between aggregate income and public expenditures in Greece and Portugal during the years 1958-85. Unlike more conventional specifications, our analysis focuses on the movement of different components of public expenditures. Permanent income, relative prices, stabilisation policy and socio-political factors emerge as the main determinants of public expenditures, while the results reveal significant differences in responses to these determinants across components of expenditures and between the two countries.N/