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Fiscal Capacity, Democratic Institutions and Social Welfare Outcomes in Developing Countries

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  • Syed Mansoob Murshed
  • Brahim Bergougui
  • Muhammad Badiuzzaman
  • Mohammad Habibullah Pulok

Abstract

The purpose of this paper is to gauge the various determinants of social sector spending captured by social protection and education spending in a cross section of developing countries, a subject on which there is scant empirical evidence. We hypothesize that fiscal capacity is necessary but not sufficient for resource allocation in this area, because the political will to do so must also be present. Using a panel data instrumental variable approach, we find that greater fiscal capacity robustly raises social spending in developing countries in the period 1990 to 2010. It is also strongly evident that rising democratisation enhances social sector spending; the presence of greater democracy and higher fiscal capacity could reinforce this effect. Our work also innovatively incorporates inequality into the analysis, finding that social expenditure is greater in more egalitarian societies. Military expenditure also appears to crowd out social protection expenditure, but not robustly.

Suggested Citation

  • Syed Mansoob Murshed & Brahim Bergougui & Muhammad Badiuzzaman & Mohammad Habibullah Pulok, 2022. "Fiscal Capacity, Democratic Institutions and Social Welfare Outcomes in Developing Countries," Defence and Peace Economics, Taylor & Francis Journals, vol. 33(3), pages 280-305, April.
    • Handle: RePEc:taf:defpea:v:33:y:2022:i:3:p:280-305
    DOI: 10.1080/10242694.2020.1817259
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    Cited by:

    1. Avom, Désiré & Keneck-Massil, Joseph & Njangang, Henri & Nvuh-Njoya, Youssouf, 2022. "Why are some resource-rich countries more sophisticated than others? The role of the regime type and political ideology," Resources Policy, Elsevier, vol. 79(C).
    2. Brahim Bergougui & Syed Mansoob Murshed, 2023. "Spillover effects of FDI inflows on output growth: An analysis of aggregate and disaggregated FDI inflows of 13 MENA economies," Australian Economic Papers, Wiley Blackwell, vol. 62(4), pages 668-692, December.
    3. Kamin, Katrin & Bayerlein, Michael & Dombrowski, Jacqueline, 2023. "Zeitenwende für die Außenwirtschaftspolitik," Open Access Publications from Kiel Institute for the World Economy 270885, Kiel Institute for the World Economy (IfW Kiel).

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