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Level of corruption
As suggested by Krueger (1974), large bribes are likely to be available in conjunction with items produced by firms operating in markets where the degree of competition is low. Further more, the illegal nature of corruption and the ensuing need for secrecy imply that corrupt officials will choose goods whose exact value is difficult to monitor (Mauro 1998). It is, therefore, expected that corrupt regimes will have a tendency to tilt their budget towards sectors that procure goods and services that are specialised and have high, up-to-date technology content. Therefore, as suggested by Mauro (1998), corrupt politicians may be expected to spend more public resources on those items on which it is easier to levy large bribes while keeping those bribes secret. It is therefore expected that sectors such as defence and economic services be positively related to corruption. Other sectors such as education, health and social welfare are expected to be negatively related to corruption. However, the relationship between corruption and general public services spending may not be known from the outset.
Political characteristics
In the literature some arguments were found stating that the internal allocation of the public budget is largely driven by the political characteristics of a country, as measured by the level of political and civil rights enjoyed by its citizens and the level of transparency of the government. As argued by Mahdavi (2004), it is generally agreed that certain civil liberties increase the degree of public participation in and scrutiny of the resource allocation process within the public sector. Economies that are characterised by dictatorships require massive support from the military to prevent attempts on the government. The military budget in non-democratic regimes may therefore reflect the government’sdemand for protective services (Kimenyi & Mbaku 1995), however, as the economy becomes more liberal and accountable, there is a tendency to reallocate the budget towards those spending categories that the public would prefer. For example, as suggested by Nader (1994), as political liberties increase there appears a shift in the budget towards health and social security. Thus, it is expected that repressive regimes will tilt the budget toward defence and public services spending, while the liberal ones tilt the budget in favour of social sectors and economic services.
Political instability
Political instability or threats thereof are very important in the allocation of the budget. As suggested in the literature, a country that is under constant threat of instability tends to allocate the budget in favour of those functional categories that seek to restore stability. This is the case whether the political system in the country is democratic or dictatorial. It is, therefore, expected that countries that are under threat of or are experiencing political instability will spend more of their budgets in favour of the general public services sector and of the defence sector.
Less budget allocation will be made to the social and economic sectors of the economy. For example, countries that have a history of coups, social unrests, and ethnic tensions tend to spend more on the military and on administration. On the other hand, politically stable countries tend to spend more on those sectors where social returns are high, such as education, health and economic services.
Level of income
In what has come to be known as Wagner’s law, Aldoph Wagner (1883-1953) hypothesised that government spending would increase in the course of development to a modern society. This relationship, as argued in the literature (Mahdavi 2004), reflects a greater role for the government as the economy becomes more complex and the demand for public goods and social programmes rises. On this basis therefore, we may infer certain changes in the composition of public spending as the role of the public sector changes during the long-term process of development. For example, in the early stages of development the government may be involved in virtually all the sectors of the economy, however, as the private sector develops, the government tends to withdraw from some sectors and focus instead on the provision of pure public goods. It is, therefore, expected that as income increases the public budget will be biased towards those functions that the private sector cannot efficiently provide. Such sectors include defence, public services, economic services and social welfare. It is thus expected that level of income will be positively related to these sectors while negatively related to education and health.
Acknowledgements
SUMMARY
1.1 Introduction
1.2 Background
1.3 Review of public spending and public debt performance in Africa
1.4 Objectives of the study
1.5 Research statement
1.6 Hypotheses of the study
1.7 Scope of the study
1.8 Conclusion
1.9 Outline of the dissertation
CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction
2.2 Theoretical literature review
2.3 Empirical literature
2.4 Summary and conclusions
CHAPTER THREE: METHODOLOGY
3.1 Introduction
3.2 Analytical Framework
3.3 The Model
3.4 Diagnostic tests
3.5 Estimation procedure
3.6 Description of the data
3.7 Univariate analysis
3.8 Summary
CHAPTER FOUR: GENERAL PUBLIC SERVICES SPENDING
4.1 Introduction
4.2 The relationship between general public services spending and governance
4.3 Estimation results of general public services spending
4.4 Summary of the main findings
CHAPTER FIVE: DEFENCE SPENDING
5.1 Introduction
5.2 The relationship between defence spending and governance
5.3 Estimation results of defence spending
5.4 Summary
CHAPTER SIX: EDUCATION SPENDING
6.1 Introduction
6.2 The relationship between education spending and governance
6.3 Estimation results of education spending
6.4 Summary
CHAPTER SEVEN: HEALTH SPENDING
7.1 Introduction
7.2 The relationship between health spending and governance
7.3 Estimation results for health spending
7.4 Summary
CHAPTER EIGHT: SOCIAL WELFARE SPENDING
8.1 Introduction
8.2 Relationship between social welfare spending and governance
8.3 Estimation results of social welfare spending
8.4 Summary
CHAPTER NINE: ECONOMIC SERVICES SPENDING
9.1 Introduction
9.2 Relationship between economic services spending and governance.
9.2 Estimation results of economic services spending
9.3 Summary
CHAPTER TEN: ‘OTHER’ SPENDING
10.1 Introduction
10.2 Relationship between governance and ‘other’ spending
10.3 Estimation results of ‘other’ spending
10.3 Summary
CHAPTER ELEVEN: PANEL SYSTEM APPROACH ESTIMATIONS
11.1 Introduction
11.2 Panel systems estimation results
11.3 Concluding remarks
CHAPTER TWELVE: EXPLORING BEST PRACTICE IN PUBLIC BUDGET
ALLOCATION
12.1 Introduction
12.2 Criteria of public budget allocation
12.3 Summary of findings
CHAPTER THIRTEEN: CONCLUSION AND POLICY RECOMMENDATIONS
13.1 Introduction
13.2 Conclusions
13.3 Policy recommendations
13.3 Limitations of the study
13.4 Suggestions for future studies
REFERENCES
APPENDICES
