Determinants of Government Size in Nigeria: A Test of Wagner’s Hypothesis
This study investigates the determinants of government Size in Nigeria by disaggregating the total expenditure into functional categories of government expenditure, using annual time series data for a period of 62 years (1961-2023). Also, unit root properties of the variables using Augmented Dickey Fuller (ADF) was carried out to examine the stationary nature of each of the variable used in the models of this study, and the results indicate that most of the variables were stationary at level while others at first difference. The results of the cointegration tests reveals that the F-statistic values of the tests are greater than both I(0) and I(1) critical value bounds at 5% level of significance in most of the tests which is a condition for rejecting the null hypothesis of no long run relation among the variables of each equation. The study further employs Autoregressive Distributive Lag (ARDL) model. The study also, carries out a review of those theories that had formed the basis of previous empirical studies such Wagner’s Law. The study found that total revenue, aggregate income, per capital income, revenue per capita and population contribute to the expansion of the size of government expenditure while civilian regime dummy variable indicates that the size of government is lower during civilian era than during a military regime in all estimations; election year is not associated with higher government expenditure and no any effect in government administration. The result also find positive and negative effects of all expressions of revenue and fiscal deficit on the government size. The study therefore, recommends that regulatory authorities should realize the inevitability of the need for additional governmental services that would be demand-driven; the policy makers or regulatory authorities need to understand when the expenditure is overblown so as to take appropriate measures as a corrective action. Finally, population reduction programme or legislation is required in the country in order to curtail the size of government expenditure.
Keywords: ARDL, Government Size, income, per capita income, functional categories
JEL classification: 01, E62
