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

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

doi:10.2139/ssrn.2548946

Cited by 9 publications

(12 citation statements)

References 43 publications

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“…Sims (1980) and Sims, Stock, and Watson (1990) 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 (2009), Farzanegan (2011), Farzanegan and Raeisian Parvari (2014, and Dizaji, Farzanegan, and Naghavi (2016), 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: The Unrestricted Var Modelmentioning

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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Section: The Unrestricted Var Modelmentioning

confidence: 99%

Oil booms and inequality in Iran

Farzanegan

Krieger

2018

Review Development Economics

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“…Governments that earn voters support in democracies are mostly those who spend more on social and community welfare programs (see Hicks & Swank 1992;Isham et al 1997;Husted & Kenny 1997;Tavares & Wacziarg 2001;Boix 2001Boix , 2003Stasavage 2005;Aidt et al 2006). It may therefore be said that democracy encourages prudent government spending (see Dizaji et al 2016). Other "costs" of democracy which increases government spending include the cost of running local level and national parliamentary and presidential elections.…”

Section: Determinants Of the Growth Of Government Spending -A Brief Smentioning

confidence: 99%

Explaining the Growth of Government Spending in Ghana

Obeng¹,

Sakyi²

2017

The Journal of Developing Areas

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Government spending is a reflection of government policy choices. However, the implications of government spending growth necessitate an understanding of the drivers of the growth of government spending. The present paper modifies the median voter model to explain the growth of government spending by introducing foreign aid, public debt, and democracy. The paper argues that these variables are important drivers of government spending for developing countries, hence a model explaining the growth of government spending of these group of countries that ignores the potential impact of foreign aid, public debt and democracy does not capture fully what determines the growth of government spending. Such a model is too simplistic and less relevant for policy purposes. The paper therefore makes use of annual time series data to determine the long-and shortrun impact of per capita income, tax share, minimum wage, population growth, foreign aid, public debt and democracy on the growth of government spending in Ghana over the period 1980-2012. The autoregressive distributed lag (ARDL) bounds test for cointegration and the error correction model (ECM) procedures were used for the estimation. Additionally, the paper provides results of generalized forecast error variance decomposition in order to determine the effect of innovations in both the dependent and independent variables on the dependent variable. The findings reveal that per capita income, tax share, population growth, minimum wage, foreign aid, public debt, and democracy are key determinants of the growth of government spending in the long-run. With the exception of minimum wage, these variables are also key determinants of the growth of government spending in the short-run. Variance decomposition results suggest innovations in per capita income and population growth generally account for the largest variations in government spending over the horizon considered. Also, innovations in foreign aid, public debt, and democracy are responsible for significant variations in government spending. The findings and policy recommendations of the paper provide vital information for policy implementation in Ghana.JEL Classifications: C22, F35, H50, H60

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“…The study shows that political participation is most effective in reducing military spending, while other elements of democracy play a distant secondary role. Dizaji et al (2016) use vector autoregressive (VAR) models for data covering 1960 to 2006 to examine the impact of political institutions on various categories of government expenditure in Iran. Their results show that improvements in the political situation have a negative impact on military expenditures and a positive impact on nonmilitary expenditures such as education and health as well as domestic security expenditures.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The differences among developing countries in the relative size of their military burdens results from their different economic and political conditions (Maizels and Nissanke, 1986). A strand of literature argues that democracies spend less on the military than autocracies do (Kimenyi and Mbaku, 1996;Dunne and Perlo-Freeman, 2003;Fordham and Walker, 2005;Dizaji et al, 2016). In a democratic state, internal conflicts are settled by compromise and in nonviolent ways, providing the conditions by which external conflicts between democratic states can also be settled peacefully.…”

Section: Introductionmentioning

confidence: 99%

Democracy and Militarization in Developing Countries: A Panel Vector Autoregressive Analysis

Dizaji

Farzanegan

2021

Defence and Peace Economics

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This study examines the dynamic relationship between democracy and the military in more than 40 developing countries from 1990 to 2017. We investigate the dynamic interaction between democracy and military institutions using a panel vector autoregressive model and impulse response functions as well as variance decomposition analyses. We show that democracy plays a significant role in the substitution of nonmilitary expenditures for defense expenditures. We also investigate the response of democracy to positive shocks in military and nonmilitary spending. We find that the responses of political system and different indexes of democracy including electoral, liberal, participatory, deliberative, and egalitarian democracy to positive shocks in military expenditures are negative and significant, whereas their responses to the shocks in nonmilitary expenditures are not significant. This result suggests that the political behavior of governments in developing countries is influenced more heavily by their spending on the military sector than by their spending on the nonmilitary sector.

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

Cited by 9 publications

References 43 publications

Oil booms and inequality in Iran

Oil booms and inequality in Iran

Explaining the Growth of Government Spending in Ghana

Democracy and Militarization in Developing Countries: A Panel Vector Autoregressive Analysis

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