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

41 Pages Posted: 6 Jun 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: April 1, 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 (April 1, 2015). Centro Studi Luca d'Agliano Development Studies Working Paper No. 381. Available at SSRN: https://ssrn.com/abstract=2607577 or http://dx.doi.org/10.2139/ssrn.2607577

Sajjad Dizaji

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 )

Deutschhausstra├če 12
Marburg, 35037
Germany

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

Alireza Naghavi (Contact Author)

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy

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

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