Balbir S. Sahni

Cointegration and Wagner's hypothesis: time series evidence for Canada

It is argued that Wagners hypothesis is essentially a proposition about the secular comovement of income growth and public spending. Using the Engle and Granger cointegration tests and time series data from Canada, the long-run validity of Wagners hypothesis is maintained.

Public infrastructure and the productive performance of Canadian manufacturing industries

This article examines the effects of public infrastructure on the productive performance of 12 two-digit Canadian manufacturing industries. A flexible cost function incorporating public capital infrastructure is estimated for each industry separately using annual time series data for 1961–1995. The effects of public infrastructure on productivity are measured in terms of both cost-saving (dual) and output-augmenting (primal) measures. We also investigate how public capital influences the input demand and cost structure in each industry and calculate the rate of return to public capital. The empirical results provide strong evidence of the important role public infrastructure plays in the productivity of manufacturing industries. The public capital serves as a substitute for both private capital and labor in most industries. The rates of return to public capital are significant and vary over the years.

Public Expenditure and National Income Causality: Further Evidence on the Role of Omitted Variables*

Whether changes in public expenditure growth help predict changes in national income growth (and/or vice versa) remains an important issue of sustained interest in the empirical public finance literature. In recent years, attention has mainly been confined to two specific areas, namely, estimation of the impact of the public sector on output growth (by means of regression analysis) and causality testing. Unfortunately, the outcome of both types of analysis has been inconclusive. Focussing on the impact studies, we note that a number of empirical investigations have attempted to measure the effect of the size of the public sector on overall economic growth. For instance, Ram [19], utilizing a two-sector model, found that growth of government size has a positive effect on economic growth. Landau [14; 15], however, presented opposite evidence, indicating that the government sector expansion led to a decline in output growth for many DCs and LDCs since 1960. In a recent study, Barth, Keleher and Russek [4] estimated variants of Rams models with data for 30 countries. Their empirical results largely support a negative relationship between the scale of government and aggregate economic activity. Furthermore, using the Hausman procedure, they rejected the hypothesis that the independent variables (namely, real government spending or other measures of the scale of the government, depending on the specification) in the regression equations are exogenous. This strongly suggests that the conclusions reached by

Cost Structure of the Indian Cement Industry

Analyses the structure of costs in the cement, lime and plaster industry of India. Using aggregative data for the period 1960-61 to 1982-83 a generalised translog cost function is estimated. It is discovered that (1) this industry has been characterised, by and large, by allocative efficiency; (2) production is characterised by increasing returns to scale; (3) technical progress has been biased against the use of capital; and (4) there exist considerable opportunities for substitution between factors of production. Several policy conclusions of the analysis are also examined.

Towards measuring allocative efficiency in selected industries of India

This paper examines trends in allocative efficiency over the period 1960–1961 to 1986–1987 in seven Indian industries, namely refining and manufacture of sugar; petroleum refining; manufacture of chemicals, fertilizers and pesticides locomotives and parts, locomotives, and cotton textiles. We discover that allocative inefficiency has been non zero in each industry for every year. Allocative inefficiency has not declined over time in those industries where prices are administered, whereas in industries where prices are not administered it has. Industries that are predominantly in the public sector are not necessarily characterized by greater allocative inefficiency than those that are predominantly in the private sector.