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

Quaderni - Working Paper DSE N° 986

42 Pages Posted: 13 Jan 2015

See all articles by Sajjad Dizaji

Sajjad Dizaji

Tarbiat Modares University

Mohammad Reza Farzanegan

University of Marburg - Center for Near and Middle Eastern Studies (CNMS)

Alireza Naghavi

University of Bologna - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: January 12, 2015

Abstract

This study examines how quality of political institutions affects the distribution of government budget in Iran. We first introduce a mechanism through which this can shift government expenditure from patronage to more constructive public spending. Using impulse response functions (IRF) and variance decomposition analysis (VDC) on the basis of Vector Autoregressive (VAR) model, our results imply that a positive shock towards more democratic institutions leads to negative and statistically significant response of military spending and positive and statistically significant response of education expenditures. Our results are robust to different political institutional quality indicators, ordering of variables in the VAR and different specifications of government spending categories.

Keywords: political institutions, military spending, Iran, VAR modelling

JEL Classification: H11, H41, P16, O53, O43

Suggested Citation

Dizaji, Sajjad and Farzanegan, Mohammad Reza and Naghavi, Alireza, Political Institutions and Government Spending Behavior: Theory and Evidence from Iran (January 12, 2015). Quaderni - Working Paper DSE N° 986. Available at SSRN: https://ssrn.com/abstract=2548946 or http://dx.doi.org/10.2139/ssrn.2548946

Sajjad Dizaji (Contact Author)

Tarbiat Modares University ( email )

Jalal Ale Ahmad Highway
Tehran, Tehran 14115-111
Iran

Mohammad Reza Farzanegan

University of Marburg - Center for Near and Middle Eastern Studies (CNMS) ( email )

Deutschhausstraße 12
Marburg, 35037
Germany

HOME PAGE: http://www.uni-marburg.de/cnms/wirtschaft

Alireza Naghavi

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy

HOME PAGE: http://alirezanaghavi.altervista.org/

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