Determinants of government expenditures of developing countries.

What is it about?

This article aims at identifying the determinants of government expenditures in 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 institutions and governance variables significantly influences the consumption expenditure in developing countries.

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Photo by Brett Jordan on Unsplash

Photo by Brett Jordan on Unsplash

Why is it important?

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 the consistency of our findings, we ran alternative specifications as well as conducted extreme bound tests. Our results largely survived these tests showing the robustness of our findings.

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