This paper is an attempt to test the existence of Wagner’s Law in Pakistan. In this connection the Johansen and Juselius (1990) Cointegration approach has been used to test the long-run relationship between government expenditures and its determinants for Pakistan. Short-run dynamics are estimated by using the Error Correction Mechanism (ECM), various diagnostics and the stability tests are used to examine the existence of the relationship between variables. We find a long-run relationship between government expenditures and the determinants like per capita income, openness of Pakistan’s economy, and the financial development. The existence of this relationship has far reaching implication for policy makers in designing the expenditures policy of the government in Pakistan as well as for other developing countries like Pakistan.

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