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

41 Pages Posted: 8 Oct 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: September 22, 2015

Abstract

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.

Keywords: political institutions, military spending, education spending, Iran, VAR modeling

JEL Classification: H110, H410, P160, O530, O430

Suggested Citation

Dizaji, Sajjad and Farzanegan, Mohammad Reza and Naghavi, Alireza, Political Institutions and Government Spending Behavior: Theory and Evidence from Iran (September 22, 2015). CESifo Working Paper Series No. 5505. Available at SSRN: https://ssrn.com/abstract=2670562

Sajjad Dizaji

Tarbiat Modares University ( email )

Jalal Ale Ahmad Highway
Tehran, Tehran 14115-111
Iran

Mohammad Reza Farzanegan (Contact Author)

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

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
21
Abstract Views
465
PlumX Metrics