Socioeconomic and Political Determinants of Public Spending Allocations: A Panel Data Analysis of Aggregate and Sectoral Spending

 By: Babar Amin, Mirajul Haq, Arshad Ali Bhatti

A well-established segment of economic literature argues for an efficient allocation of resources to overcome poor growth performance, poverty, and inequality. However, the resource allocation response towards these economic issues varies across countries. Based on their respective socio-economic and political fabric, countries set priorities and accordingly allocate the available resources towards different sectors of the economy. The sectoral allocation of the available resource pie has repercussions for various economic variables like growth, poverty, and income inequality. In this context, this study contributes to the existing literature on the subject in two ways. First, this study aims to assess the factors that determine overall public spending across economies by focusing on socio-economic, political, and institutional factors. Second, the study examines the role of those factors in determining health, education, infrastructure, and defence spending. The study uses the panel data of 104 countries for the period 1990-2016 and employs FE-IV method to conclude that bureaucratic quality, democratic accountability, internal conflict, external conflict, government stability, and military involvement are the main institutional and economic variables determining public spending allocations at the aggregate and sectoral levels.

Publication Link: https://pssr.org.pk/article/socioeconomic-and-political-determinants-of-public-spending-allocations-a-panel-data-analysis-of-aggregate-and-sectoral-spending

Convergence in Human Development across Districts of Pakistan: Evidence from Club Convergence Test

 by: Noor Ahmed, Babar Hussain, Arshad Ali Bhatti

Studies on the convergence club have become a focal point in economic growth and development literature over the last three decades. This paper analyzes the club convergence hypothesis going beyond the traditional use of GDP per capita. It examines the convergence club of 97 Pakistani districts over the period 2004-20015. The analysis is based on an augmented index for measuring development through convergence and the clustering method of Phillips and Sul (2007). The index consists of 3 sub-indices of education, health, and household welfare level, with each index further composed of 5 indicators. The Principal Component Analysis (PCA) is used to aggregate these indicators to get sub-indices and a final development index. Results of the study indicate that the districts do not converge to the same long-run equilibrium. Instead of overall convergence, we find eleven convergence clubs and one non-convergent group for human development. The existence of clubs means that measures aimed at reducing disparities in human development and promoting regional growth should consider the specific characteristics revealed in the convergence analyses. Spatial differences thus need to be addressed mainly through pro-poor regional policies.

Publication Link: https://pssr.org.pk/issues/v5/2/convergence-in-human-development-across-districts-of-pakistan-evidence-from-club-convergence-test.pdf