Fiscal Capacity, Democratic Institutions and Social Welfare Outcomes in Developing Countries

Mansoob Murshed, Brahim Bergougui, Muhammad Badiuzzaman, Mohammad Habibullah Pulok

Research output: Contribution to journalArticlepeer-review


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.
Original languageEnglish
Pages (from-to)(In-press)
JournalDefence and Peace Economics
Early online date12 Sep 2020
Publication statusE-pub ahead of print - 12 Sep 2020


  • Democratic Institutions
  • Fiscal Capacity
  • Social Protection Expenditure

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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