1.0 Introduction Generally, Abizadeh, S. and Youse, M.

(1988) did explained that Wagners law suggest that welfare state will evolves from free market capitalism due to the population voting for ever increasing social services. Obviously, the Wagners law predict that the development of an industrial economy will be accompanied by an increased share of public expenditure in gross national products. part of that, Andres, J., Domenech, R. and Fatas, A. ( !!8) also explained that the si!e as well as growth of the public expenditure "G# is complex societal process that cannot be well explained exclusively by the discipline of the economics. $t is because there are too many causal factors behind the si!e and growth of the public expenditures. s in the Wagner law, it is concerning the secular trend of the government expenditures. $t was agree by "han#, $.% &in, '.% "audi(, S.). ( !!*) whereby he believed that as per capita income rises in industrialising nations, and it will cause their public sectors grow in relative importance. On the other hand, Wagner did identified three main factors for increase the government spending. %irst at all, administrative and also protective role of the current government were believed that able to increase as a countrys economy develops. &hen, )arro, R. J. (199!) expressed that the expansion of an economy, government expenditures on 'cultural and welfare( would definitely increase, especially on education as well as health. )n*uestionable, the progress in technology re*uires of developed nations re*uires the government to undertake certain economic services that private sector may no interest to offer to the public. ccording to the explanation from Abizadeh, S. and Youse, M. (1988), Wagner predicted the expansion of 'cultural and welfare( expenditures based on the presumption that as income increase, the society definitely would re*uest more on education, entertainment, a more e*uitable distribution of wealth and income, as well as more public services like general hospital and so on.

On the other hand, there are general six different formulations of Wagners hypothesis. &hese are includes shown in table +.,No + 1 3 6 9 : Version Formulation .eacock wiseman 'traditional( G / f "G0.# version .ryor version 2 / f "G0.# Goffman version G / f "G0.45# 7usgrave version G 4 G0. / f "G0.8 4 5# Gupta 4 7ichas version G 4 5 / f "G0. 4 5# .eacock Wiseman 'share( version G 4 G0. / f "G0.# Table 1.0 Different Formulations of Wagners Hypot esis

Andres, J., Domenech, R. and Fatas, A. ( !!8) did mentioned that different kinds of countries with differences in the historical setting like attitude toward growth, changed communication, demonstration effect of affluence and welfare measures taken abroad, the conflict of political ideologies will be different in the patterns of the government expenditure. 0ue to that, Wagner ;aw will be used to discuss and determine the relationship the government expenditures especially on public expenditures on the growth of the economic in 7alaysia.

!.0 "roblem #tatement

ccording to the explanation from Andres, J., Domenech, R. and Fatas, A. ( !!8), the developed countries currently spend relatively more on their public services than they had done before due to the evolving conception of the duties of the state. <owever, 7alaysia still spends relative little on the public services that offered to the public and society. Obviously, studies for developing countries like 7alaysia show that there is no consensus as regards Wagners hypothesis. %or example, empirical study by )arro, R. J. (199!) found a bi= directional causality between government total expenditure and income in &hailand, "han#, $.% &in, '.% "audi(, S.). ( !!*) used two step procedures of >ngle and Granger and standard causality tests found no long run relationship between public spending and real income and no causality was established in $ndia. &hough, +o,,man, J.J. (19-8) confirmed the validity of Wagners law in his study, Mannin#, &.M.% Andriacanos, D. (199.) using a ?ound &esting analysis found that Wagner law did not hold over the period studied "+@A, = 1,,:# ratherB he found a weak empirical support in Ceyness preposition for the case of ?runei. 0ue to that, the obDective of this paper is to empirically investigate if government expenditure pattern in 7alaysia follow Wagners law using data from 1,,1 1,+1. &his paper differs from previous studies for 7alaysia because it uses a disaggregated data for government expenditure to test for Wagners hypothesis as this will have some policy relevance. s for the previous studies that had been done by +u/ta, S.0. (19-1), total government expenditures of 7alaysia were used to determine the Wagners law. 0ue to that, this study will be used in addition to total the government expenditures, a disaggregated government expenditure data that economic growth may determine. s we know, the world is not static, hence economic condition and policies changes implying that it is not only government expenditure that can affect economic growth hence the inclusion of other fiscal policy variable and political freedom to augment the functional form of Wagner ;aw.

ccording to the Wagner ;aw, the functional relationship between the government expenditures and gross domestic products "G0.# can be shown as below+2 3 , (+D0)

Whereby G> is total government expenditures and G0. is gross domestic products. &herefore, the respective research will employ the use of formulation four as it stems from the interpretation of the Elaw as predicting an increasing relative share for the public sector in the total economy as per capita income grows. $t is now generally agreed that Wagner had the relative growth of the public sector in mind. &herefore, the problem statement of the research is to Dustify the validation of the functional relationship between the government expenditures and gross domestic products in 7alaysia from year 1,,1 to year 1,+1 under the Wagner law.

$.0 %b&ecti'e of (esearc Generally, the obDective of the research as shown as below-

0etermine the impact of government expenditures on 7alaysias Gross 0omestic .roduct "G0.# from year 1,,1 to 1,+1.

0etermine the growths of government expenditures on the growth of Gross 0omestic .roducts from year 1,,1 to 1,+1.

0etermine the relationship between government expenditure and economy growth of 7alaysia in year 1,,1 to 1,+1.

).0 (esearc *uestion

Obviously, it is typically important for the researcher to identify and list down the research *uestions before plan and carry out the whole research. $t is because the respective research *uestions can be a useful guideline for the researcher so that they can carry out the research accordingly. &he research *uestions for the respective research as listed down below What impact of government expenditures on Gross 0omestic .roducts "G0.# from year 1,,1 to 1,+1F What impact of the growths of government expenditures on the growth of Gross 0omestic .roducts from year 1,,1 to 1,+1F What is the relationship between government expenditures and economy growth of 7alaysia in year 1,,1 to 1,+1F

+.0 (esearc Hypot esis

ccording to the explanation from Johansen, S. (1988), hypothesis can be described as the proposed explanation for a phenomenon. Obviously, the working hypothesis is a kind of hypothesis that is provisionally accepted as a basic for further research. research, the hypothesises are listed down as below<, - &he growth in government expenditures contributed to the growth of Gross s for this

0omestic .roducts "G0.# of 7alaysia from 1,,1 to 1,+1. <, - &he less fund allocation for government expenditures affects the poor

performance of Gross 0omestic .roducts "G0.# of 7alaysia from 1,,1 to 1,+1. <, - &he government expenditures will affect the Gross 0omestic .roducts "G0.# of

7alaysia from year 1,,1 to year 1,+1.

,.0 #ignificance of #tudy

)n*uestionable, the respective study or research on the relationship between government expenditures and gross domestic product is very important to be carried out. &herefore, the significance of the studies will be discussed as below-./ 0o'ernment s for the government of 7alaysia, the outcome of the research is absolutely very important and critical. $t is because it can be useful and significant guidelines for the government in preparing the yearly budget. %or the example, if the outcomes of the research show that the increase in government expenditures will determine the growth of the Gross 0omestic .roduct "G0.#, and then government should consider allocating more funds for government expenditures especially on welfare and public services. ccording to the explanation from "han#, $.% &in, '.% "audi(, S.). ( !!*), 7alaysia governments did not allocate so many funds to offer more public services in yearly budget. &herefore, the results of the research can be useful evidence to change the 7alaysias yearly budget allocation from public services.

-1/ "ri'ate #ector )n*uestionable, private sector also play an important role in order to help the government to improve the economic growth in 7alaysia. $t was agreed by "han#, $.% &in, '.% "audi(, S.). ( !!*# whereby he explained that private sectors can offer more free public services for the public and society like free bus stop, free toilet and so on. 0ue to that, the outcomes of the research will be important to motivate the private sector so that they will provide more public services to the local society in order to improve the Growth 0omestic .roduct "G0.# of 7alaysia.

2.0 3imitation of #tudy

Overall, the studies that carried out to determine the relationship between government expenditures especially in public services and the growth of Gross 0omestic .roduct "G0.# is very important as a significant guideline for the government 7alaysia in plan for yearly budget. <owever, there are still some limitation occurs in this particular process. mong the limitation of the research is the study did not consider of other factors like attitude toward growth, changed communication, demonstration effect of affluence and welfare measures taken abroad, the conflict of political ideologies will be different in the patterns of the government expenditure. part of that, the research also did not consider on the political influences factor to maintain the output in terms of performance. %or the example, keeping down the rate of growth of crimeB reducing hospital waiting listsB reducing class si!esB reducing rates of infant mortality and others. $t may then be that public sector unit costs rise not because of inefficiency, but because worsening social conditions make it more difficult to maintain levels of performance. %or instance, the spread of new diseases, or increases in numbers of one=parent families, migrant children, and the consumption of drugs among the members in the society. 0ue to that, the increment in the government expenditures in social and welfare might not necessary improve the economy growth in 7alaysia.

4.0 5onclusion

s a conclusion, the proposed research will use the total government expenditure as well as specific expenditure of government as the dependent variables to prove the Wagners law validated for the economic growth in 7alaysia. &he implication of the result is that since it is increase in total government expenditure as well as specific expenditure on general administration and community and social services that causes economic growth, it is a good research outcomes for the policy makers as a guideline in plan for the yearly budget so that increase total expenditure as well as that of specific expenditure as this will not hurt economic growth, rather it will propel economic growth in 7alaysia.