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The political economics of the Malaysian subnational governments’ fiscal behavior

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  • Abdul Jalil, Ahmad Zafarullah

Abstract

This paper attempts to shed light on the political economy of the Malaysian state governments’ budgetary behavior by tailoring hypotheses drawn from recent theoritical literature to the Malaysian institutional context and testing them empirically. Our main objective here is to examine whether state governments’ fiscal behavior can partly be explained by the political attributes and the institutional characteristics of the government and of the legislature. In particular, we will try to analyze whether the incentives for the state governments to observe a prudent spending behavior have not been undermined by the fact that they have been able to influence relevant central government decisions regarding their finance. Our estimations results show that states that are overrepresented at the executive level tend to have higher spending and deficits. However, we don’t find any correlation between overrepresentation at the Parliament and states governments’ fiscal outcomes. This can be explained by the fact that in Malaysia as is frequently the case in developing nations, the legislature is peripheral to the executive in terms of decision making power.

Suggested Citation

  • Abdul Jalil, Ahmad Zafarullah, 2009. "The political economics of the Malaysian subnational governments’ fiscal behavior," MPRA Paper 24988, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:24988
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    References listed on IDEAS

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    More about this item

    Keywords

    State governments; Fiscal behavior; Political Economy;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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