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Fiscal capacity and social protection expenditure in developing nations

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  • Syed Mansoob Murshed
  • Muhammad Badiuzzaman
  • Mohammad Habibullah Pulok

Abstract

There is scant analysis on the causal relationship between fiscal capacity and social protection expenditure in the developing world. We investigate the causal relationship between fiscal capacity of the state and social protection expenditure, hypothesizing that fiscal capacity is necessary but not sufficient for resource allocation in this area. Using a panel data instrumental variable approach, we find that greater fiscal capacity robustly raises social protection spending in developing countries between 1990 and 2010, providing strong evidence for social sector spending being augmented by enhanced fiscal capacity in the presence of a well-functioning democracy.

Suggested Citation

  • Syed Mansoob Murshed & Muhammad Badiuzzaman & Mohammad Habibullah Pulok, 2017. "Fiscal capacity and social protection expenditure in developing nations," WIDER Working Paper Series 060, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:wp2017-60
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    References listed on IDEAS

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