Arbeitspapier

Political Institutions and Government Spending Behavior: Theory and Evidence from Iran

This study examines how the quality of political institutions affects the distribution of the government budget in Iran. We first introduce a mechanism through which democracy can shift government expenditure from national defense (military) to productivity-enhancing public spending (e.g., education). Using impulse response functions (IRF) and a variance decomposition analysis (VDC) on the basis of a vector autoregressive (VAR) model, our results imply that the response of military spending to an improvement (a deterioration) of democratic institutions is negative (positive) and statistically significant, whereas that of education spending is positive (negative) and significant. Our results are robust to other indicators of political institutions, different orderings of variables in the VAR and alternative specifications of government spending categories.

Language
Englisch

Bibliographic citation
Series: CESifo Working Paper ; No. 5505

Classification
Wirtschaft
Structure, Scope, and Performance of Government
Public Goods
Capitalist Systems: Political Economy
Economywide Country Studies: Asia including Middle East
Institutions and Growth
Subject
political institutions
military spending
education spending
Iran
VAR modeling

Event
Geistige Schöpfung
(who)
Dizaji, Sajjad Faraji
Farzanegan, Mohammad Reza
Naghavi, Alireza
Event
Veröffentlichung
(who)
Center for Economic Studies and ifo Institute (CESifo)
(where)
Munich
(when)
2015

Handle
Last update
10.03.2025, 11:43 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Dizaji, Sajjad Faraji
  • Farzanegan, Mohammad Reza
  • Naghavi, Alireza
  • Center for Economic Studies and ifo Institute (CESifo)

Time of origin

  • 2015

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