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The political economics of the Malaysian subnational governments’ fiscal behavior

Author

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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
    as

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    File URL: https://mpra.ub.uni-muenchen.de/24988/1/MPRA_paper_24988.pdf
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    References listed on IDEAS

    as
    1. Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2004. "Yardstick competition in intergovernmental relationships: theory and empirical predictions," Economics Letters, Elsevier, vol. 83(3), pages 325-333, June.
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    4. repec:cup:apsrev:v:96:y:2002:i:01:p:27-40_00 is not listed on IDEAS
    5. Gian Maria Milesi-Ferretti & Roberto Perotti & Massimo Rostagno, 2002. "Electoral Systems and Public Spending," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 609-657.
    6. Dahlberg, Matz & Johansson, Eva, 1999. "On the Vote Purchasing Behavior of Incumbent Governments," Working Paper Series 1999:24, Uppsala University, Department of Economics.
    7. Case, Anne, 2001. "Election goals and income redistribution: Recent evidence from Albania," European Economic Review, Elsevier, vol. 45(3), pages 405-423, March.
    8. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
    9. Snyder, James M, 1989. "Election Goals and the Allocation of Campaign Resources," Econometrica, Econometric Society, vol. 57(3), pages 637-660, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    State governments; Fiscal behavior; Political Economy;

    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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