Revista Internacional de Economía y Ciencias de la Gestión

Wagner�??s Theory of Ever-Increasing State Activities and Public Health Expenditures in Nigeria

Abstract

O Saheed Olayiwola, Fuein Vera Kum,Tunde Abubakar Bakare-Aremu

Purpose: Wagner hypothesized a bi-causal relationship between public expenditure and economic growth. But, extension of this theory to
public health expenditure and economic growth remains unsettled. This study re-examined the connection between public health
expenditure and GDP in Nigeria within the context of Wagner’s theory of ever-increasing State activities.
Design/Methodology/Approach: The study used time series data from 2000-2016 sourced from World Development Indicators. Unit root tests
were used to test the stationarity of the data. Causality between public health expenditure and GDP was done with the granger causality test
while the co-integration test was used to examine the existence of a long-run relationship between public health expenditure and GDP.
Findings: The study found a long-run relationship between public health expenditure and GDP, but, neither uni-directional nor bi-directional
relationship between public health expenditure and GDP from the granger-causality test. Hence, it was concluded that Wagner’s theory does not
explain the relationship between public health expenditure and economic growth in Nigeria.
Research Limitation: The government’s capital expenditure on social community services was used for capital health expenditure
due to unavailability of data on the government’s capital health expenditure.
Practical Implication: Economic growth is beyond a mere increase in public health expenditure.
Social Implication: Increased public health expenditure improves health and life expectancy but does not automatically translate to increase
the productivity of labour.
Originality/value: The re-examination of the dynamics of public health expenditure and economic growth