The vulnerability of public expenditures: a cross-sectional analysis

Abstract

This thesis investigates the relation between the vulnerability of various expenditure categories and political environment of a country during a fiscal adjustment program. In this study, OLS is used at analyzing cross country data. Dependent variables are the vulnerabilities of 14 different expenditure categories. In order to explain the dependent variables, 22 independent variables are used, which capture political, social and economic indicators of countries. Six of them are common to all sectors and they allow us to test the hypotheses related to vulnerability of public expenditures and political conditions of a country. These variables are indicator of political liberty, index of political stability, economic ideology of the ruling elite, the relative size of central government, military relations with neighbors and percentage decline in total budget. As a result, all these six variables are statistically important factors at determining the vulnerability of expenditure sectors.