Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/95889
Authors: 
Dizaji, Sajjad Faraji
Farzanegan, Mohammad Reza
Year of Publication: 
2014
Series/Report no.: 
Joint Discussion Paper Series in Economics 03-2014
Abstract: 
This study examines how quality of political institutions affects the distribution of government budget and how development of government spending in major sections shapes the political institutions in Iran. This question has become especially important due to recent international sanctions, aiming to change the political behavior of Iran. We use the impulse response functions (IRF) and variance decomposition analysis (VDC) on the basis of Vector Autoregressive (VAR) model with annual data from 1960 to 2006. Our results show the importance of political institutions in patronage and public goods provision spending in Iran. The results imply that a shock in positive changes of democratic quality of institutions leads to negative and statistically significant response of military spending and positive and statistically significant response of education expenditures in short term. If sanctions are successful to change the political behavior of Iran in short run (Dizaji and Bergeijk, 2013), then one can also expect to see a reduction in allocated budget for military in Iran.
Subjects: 
political institutions
government spending
Iran
VAR modelling
sanctions
JEL: 
H11
H41
P16
O53
O43
Document Type: 
Working Paper

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