Wagner's Law

Wagner's Law suggests that as an economy grows over time, the public sector's share of national income also grows. In this formula, W represents Wagner's Law coefficient, G is the total government expenditure, and Y is the national income. This relationship is based on Adolph Wagner's hypothesis which implies that an increase in prosperity leads to increased government spending on public services. It is often discussed in the context of expanding government functions and state involvement in modern industrial economies.

As a practical example, policymakers and economists might study Wagner's coefficient to understand how government spending grows in relation to the size of the economy, which might influence decisions on fiscal policy and resource allocation.