Political institutions and government spending behavior: theory and evidence from Iran

Dizaji, Sajjad Faraji; Farzanegan, Mohammad Reza; Naghavi, Alireza

doi:10.1007/s10797-015-9378-8

Cited by 43 publications

(10 citation statements)

References 49 publications

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“…This supports previous findings, which show that Iran's military and security expenditures significantly respond to shocks in oil revenues or oil prices, while social spending components do not show any significant reactions [14]. The spending behavior of the Iranian government in the wake of sanctions can be linked to the quality of its political institutions [11,13]. Dizaji et al show that sanctions have positive effects on the quality of democratic institutions in the short and medium terms, and trade openness may have a direct and positive impact on the size of its budget.…”

Section: Literature Reviewsupporting

confidence: 87%

“…In addition, this contribution will help to understand the dynamics of the shadow economy in similar economies. Finally, it is an important addition to several recent studies about international sanctions against Iran and already existing studies about its shadow economy [3,[9][10][11][12][13][14][15][16][17][18][19][20][21][22][23]. The paper is structured as follows.…”

Section: Introductionmentioning

confidence: 99%

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Lifting of International Sanctions and the Shadow Economy in Iran—A View from Outer Space

Farzanegan

Fischer

2021

Remote Sensing

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With the implementation of the Joint Comprehensive Plan of Action (JCPOA) in 2016, Iran experienced a short period without international sanctions which resulted in an annual increase in the gross domestic product (GDP) in the following two years. However, it was not just the formal economy that was affected by the sanctions. Previous studies have shown that sanctions can negatively affect the shadow (or informal) economy and may even have a larger impact on the informal economy than on the formal economy. Nighttime lights (NTL) data allow us to study shadow economy activities that are not reported in the official GDP. This study uses a panel of NTL (the DMSP/OLS and VIIRS/DNB harmonized dataset) from 1992 to 2018 for 31 Iranian provinces to investigate the association between the lifting of sanctions and the growth of the shadow economy. The empirical results suggest an increase in shadow economy activity with the lifting of sanctions while controlling for other drivers of informal activities.

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Section: Literature Reviewsupporting

confidence: 87%

Section: Introductionmentioning

confidence: 99%

Lifting of International Sanctions and the Shadow Economy in Iran—A View from Outer Space

Farzanegan

Fischer

2021

Remote Sensing

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“…Sims () and Sims, Stock, and Watson () argue against differencing cointegrated variables, instead suggesting the use of a VAR model in levels. We follow other related studies such as Farzanegan and Markwardt (), Farzanegan (), Farzanegan and Raeisian Parvari (), and Dizaji, Farzanegan, and Naghavi (), and apply the unrestricted VAR model in the levels of variables. After all, we are interested in applying tools such as the impulse‐response analysis rather than aiming at interpreting each coefficient of the VAR model.…”

Section: Methodsmentioning

confidence: 99%

Oil booms and inequality in Iran

Farzanegan

Krieger

2018

Review Development Economics

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We study the response of income inequality to positive per capita oil and gas revenue shocks in Iran. Using historical data from 1973 to 2016 and vector autoregression (VAR) as well as vector error correction (VECM) model‐based impulse‐response functions, we find a positive and statistically significant response of income inequality to oil booms. We also explore possible channels through which oil booms may increase inequality, including private sector credit growth, construction investment, international trade (imports) and real economic output. We find that following an oil boom, higher imports, private sector credit growth, and real economic output can explain the increased income gap to a certain degree in Iran's oil‐based economy. Our analysis can help policymakers evaluate and accommodate the possible positive or negative effects of inequality in Iran resulting from the 2016 lifting of the embargo against the country.

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“…The trend of government spending has been guided by several key macro agents, including political institutions (Gabrini, 2010;Butkiewicz and Yanikkaya, 2011;Dizaji et al, 2016), tax management (Anderson et al, 1986;Patnaik and Yaji, 2018), government debt and others. Dizaji et al (2016) postulated that democratic institutional aspects have negative attitudes regarding military spending by the government and positive effects regarding educational spending with the development of democratic institutions. The study further argued that an authoritarian government is more likely than a democratic one to increase military spending to safeguard its entrenched interests.…”

Section: Effects Of Government Spendingmentioning

confidence: 99%

Nexus between government debt, economic policy uncertainty, government spending, and governmental effectiveness in BRIC nations: Evidence for linear and nonlinear assessments

Qamruzzaman²

2022

Front. Environ. Sci.

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Quality institutions augment economic sustainability by ensuring domestic resource optimization with equitable development principles. Therefore, ensuring this equitable development and quality institutions is required. This study assessed the effects of government debt, uncertainty of economic policies, and government spending on institutional quality, as measured by governmental effectiveness in BRIC (Brazil, Russia, India, and China) nations from1990–2020. This study applied several econometrical techniques for empirical nexus assessment, including Augmented ARDL, nonlinear Autoregressive Distributed Lagged (ARDL), and Fourier Toda-Yamamoto causality tests. This study documented long-run cointegration in both symmetry and asymmetric assessments. In the long run, both government debt and uncertain economic policies were significantly negatively associated with institutional quality, while government spending and institutional quality were positively associated. Furthermore, the results of asymmetric ARDL revealed both long- and short-run asymmetric relationships between institutional quality and government debt, EPU, and government spending. The directional causality test documented bidirectional causality between debt and institutional quality in all nations, whereas mixed causalities were detected for uncertain economic policy, institutional quality, and government spending. Regarding policy, the results of this study suggested that economic stability was indispensable for efficient institutional quality in BRIC nations.

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Political institutions and government spending behavior: theory and evidence from Iran

Cited by 43 publications

References 49 publications

Lifting of International Sanctions and the Shadow Economy in Iran—A View from Outer Space

Lifting of International Sanctions and the Shadow Economy in Iran—A View from Outer Space

Oil booms and inequality in Iran

Nexus between government debt, economic policy uncertainty, government spending, and governmental effectiveness in BRIC nations: Evidence for linear and nonlinear assessments

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