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

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 5505

Classification and Topics

• 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

Contributors, Places and Time

• 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

Further information

• Handle: http://hdl.handle.net/10419/123143
• Last update: 10.03.2025, 11:43 AM CET