TESTING THE EFFICACY OF WAGNER'S LAW ON PUBLIC EXPENDITURE IN NIGERIA.

We tested the efficacy of Wagner's public expenditure-growth model using Nigeria data. Wagner hypothesized that public expenditure is an endogenous variable in the expenditure-growth model, and is driven by rise in output growth of an economy. We placed emphasis on the signs and significance of the coefficients of the variables used, while adopting Pesaran and Shin bounds testing approach to determine the long run relationship of the variables, and Autoregressive Distributed Lag Model of Error Correction Mechanism and Wald Coefficient Test to determine the long run and short run causality of the model. We found Wagner's hypothesis to be true in Nigerian situation. Economic growth caused total government expenditure to rise in the shortterm. We also found a downturn in current government spending at the fifth lagged value of RGDP which can be adjudged that economic growth impact on government spending lingers on till four years lag, beyond which its impacts become a constraint to growth. Changes in per capita income caused by population change increases government expenditure. We Concluded that Wagner's growth-expenditure model is efficacious in Nigerian. We suggest an increased spending on infrastructures and other income generating capital projects for revenue sustainability in the face of rising expenditure. [ABSTRACT FROM AUTHOR]