Fiscal Capacity, Democratic Institutions and Social Welfare Outcomes in Developing Countries
- Taylor and Francis Group
- Publication Type:
- Journal Article
- Defence and Peace Economics, 2022, 33, (3), pp. 280-305
- Issue Date:
© 2020 Informa UK Limited, trading as Taylor & Francis Group. 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.
Please use this identifier to cite or link to this item: