Using new historical data, this paper evaluates Wagner’s Law in Italy over the time period from 1862 to 2009. To this aim, cointegration and Granger causation are used to investigate the long run relationship between government expenditure and GDP. Moreover, DOLS method is applied to estimate consistent long run elasticity between these two variables. Our main findings are that Wagner’s Law does not hold in the long run for total government expenditure. However, we find strong support for Wagner’s Law in the shorter time span from 1862 to the end of the 19th century. Such a result seems the consequence of state-building after Italy’s political unification. The new-born Italian state made a huge effort to create nation-wide infrastructures (i.e., railways, telegraph, mail, and so on) as well as an administrative structure well-ramified throughout the country. Conversely, evidence in support of Wagner’s Law is weaker in the period following WW2. Now Wagner’s Law is not verified for total government expenditure, but only for social spending, infrastructure spending, and spending for subsidies to the economy. This seems the consequence of the expansion of income-elastic cultural and welfare expenditures that were demanded to the state
