Non-Parametric Approach to Studying Wagner's Law for the Indian Economy

The Wagnerian hypothesis asserting that the development of a nation is accompanied by rising government expenditure has been variously interpreted and tested by economists the world over. In the present paper we make use of the non-parametric approach of Multiple Rank F test when checking the direction of causation in the different versions of the Wagnerian hypothesis which have evolved due to an imprecise statement of the hypothesis in its original form. On the basis of our present exercise there emerges a near unanimous conclusion that direction of causation runs from income to expenditure thus vindicating the Wagnerian proposition in the Indian context.