Political Economy Determinants of Public Spending Allocations: A Review of Theories, and Implications for Agricultural Public Investment

Abstract

Agricultural public investments in developing countries can have substantial effects on performance in the sector and beyond. In the examination of actual resource allocation decisions by governments and donors, it is striking that strong evidence of the high economic contributions of particular types of public investments seems to coexist with a relative neglect of these public goods provisions in budget portfolios, and vice versa. This article sets out to understand this incongruence, by examining the political economy drivers of public expenditure allocation and composition. It reviews theories and empirical investigations on how (i) the incentives and constraints of key actors – including politicians, bureaucrats, interest groups and donors, (ii) the characteristics of publicly provided goods and services and (iii) country-wide political governance environments affect the prioritisation of public investments.