Determinants of Public Spending Composition in OECD and MENA Countries

Abstract

This paper examines the determinants of different public spending components in the OECD and MENA countries from a political economy perspective. The authors primarily concentrate on partisan motivation approach. Yet, they control for macroeconomic and institutional variables besides the political economy variables in the estimations. They use panel data estimation with country and year fixed effects (two-way fixed effects model) covering the period of 1980 and 2008. Regarding the estimation results of the OECD countries sample, compared to a presidential system, in assembly – elected president and parliamentary systems expansions in public agriculture, education, health, defense, and social protection spending are supported more. Among the macroeconomic variables, current account balance and GDP per capita turn out to be statistically significant. Regarding the estimation results of the MENA countries sample, it is found that right – wing ruling parties support higher levels of public spending in various areas.