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POLITICAL INSTITUTIONS, GOVERNANCE, AND CONSUMPTION EXPENDITURE IN DEVELOPING COUNTRIES: A PANEL DATA ANALYSIS
Author(s) -
Shonchoy Abu S.
Publication year - 2016
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/coep.12162
Subject(s) - autocracy , corporate governance , economics , panel data , politics , language change , developing country , consumption (sociology) , public economics , endogeneity , public expenditure , development economics , public finance , political science , macroeconomics , economic growth , democracy , econometrics , finance , sociology , art , social science , literature , law
This article aims at identifying the determinants of government expenditures of developing countries by placing emphasis on the political institutions and governance variables, which have not been addressed so much in the previous literature. Using a panel data analysis for 97 developing countries from the period 1984 to 2004, this study finds evidence that controlling for economic, social, and demographical factors, political institutional and governance variables significantly influence the consumption expenditure in developing countries. Political institutional variables such as the type of political ruling and political power in the parliament positively influence consumption expenditure; on the contrary, governance variables such as corruption influence negatively. Furthermore, we find that autocratic governments with military ruling are not particularly accommodative toward consumption expenditures as the public spending significantly shrinks under military dictatorship compared with other forms of governance. In order to check consistency of our findings, we ran alternative specifications as well as conducted extreme bound tests. Our results largely survived these tests showing robustness of our findings. ( JEL E01, E02, E61, E62, H2, H4, H5, H6, O11, O5)