Does Growth Determine Spending or Spending Determine Growth? Evidence from Sport and Recreation Expenditure in Europe

This study examines the relationship between government spending on sports and recreation and economic growth based on two distinct views: Wagner’s Law and Keynesian theory. While previous research has largely focused on total government spending, this study emphasizes the importance of analyzing specific spending categories. Panel data from 30 European countries from 2001 to 2023 were analyzed using several econometric techniques, including cross-sectional dependency tests, CIPS unit root tests, Westerlund cointegration, the Dumitrescu–Hurlin panel causality test, and the Augmented Mean Group (AMG) estimator. The findings suggest a relationship between economic growth and sports and recreation spending from the Wagnerian perspective, while the Keynesian perspective is not supported. The Dumitrescu–Hurlin panel causality analysis confirms a unidirectional relationship from economic growth to sports and recreation spending. These results suggest that economic growth drives public investment in these sectors rather than vice versa. This study contributes to the literature by offering a disaggregated analysis of public spending and its macroeconomic implications. The findings also provide useful insights for policymakers, particularly when designing growth-responsive strategies for public investment in sports and recreation.