Wagner cited education and culture to be two areas in which the government could be a better provider than the private sector. Thus, the public sector would grow after basic needs of the people are satisfied and consumption pattern of people expands towards activities such as education and culture. Third, natural monopolies such as the railroads had to be taken over by the government because private companies would be unable to run these undertakings efficiently because it would be impossible to raise such huge finance that are needed for the development of these natural monopolies.
It must be noted that studies of Wagner’s Law have not really dealt much with Wagner’s original propositions. These have been more concerned with the general trend that he predicted. With the increase in data availability for developing countries, the Law has also been increasingly tested for developing countries. Results have been mixed and examination of the Law has been continuing with increasingly sophisticated econometric methodology. The earlier studies such as Martin and Lewis (1956) have used cross section data primarily because time series data for a reasonable length of time was not available for many countries. Most of the recent studies have used time series data sometimes along with cross section data. Bird (1971) strongly argued that cross section studies are not relevant because “there is nothing in any conceivable formulation of Wagner’s “law” which tells us country A must have a higher expenditure ratio than country B simply because the level of average per capita income is higher in A than B at a particular point in time,” (p.10).