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How Does Democratization Affect the Composition of Government Expenditure?

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  • Kotera, Go
  • Okada, Keisuke

Abstract

This study examines the effects of democratization on the size and composition of government expenditure using the data of 125 countries between 1972 and 2010 at most. Specifically, we focus not only on the total expenditure but also on their composition and employ dichotomous indices of political regimes rather than score indices. Moreover, we construct instruments for democratization based on the democratization wave and conduct an instrumental variables estimation to address endogeneity problems. Our results show that while democratization does not have a significant impact on total expenditure, it increases expenditure on health and education and decreases expenditure on defense. Furthermore, considering the time-varying effect of democratization, defense expenditure starts decreasing immediately after a regime change and health expenditure increases in the medium and long run, while they do not significantly vary before a regime change. Thus, while focusing only on total expenditure does not uncover the effects of democratization, considering detailed categories of government expenditure enables us to understand how democratization changes governments' behaviors.

Suggested Citation

  • Kotera, Go & Okada, Keisuke, 2015. "How Does Democratization Affect the Composition of Government Expenditure?," MPRA Paper 67085, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:67085
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    File URL: https://mpra.ub.uni-muenchen.de/67085/1/MPRA_paper_67085.pdf
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:jeborg:v:137:y:2017:i:c:p:145-159 is not listed on IDEAS
    2. Morten Endrikat, 2017. "Natural resource rents, autocracy and the composition of government spending," MAGKS Papers on Economics 201727, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

    More about this item

    Keywords

    Democratization; Government behavior; Government expenditure;

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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