An analysis of COFOG expenditures in former Yugoslavian countries

Crnogorac, Marko; Lago-Peñas, Santiago

doi:10.3326/pse.47.2.4.

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An analysis of COFOG expenditures in former Yugoslavian countries

Marko Crnogorac*

Santiago Lago-Peñas*

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https://doi.org/10.3326/pse.47.2.4

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Table 2
Estimate of equation 1

	Total Expenditures		General public services			Defence		Public order and safety
Method	OLS	GMM	OLS		GMM	OLS	GMM	OLS	GMM
Output gap	-0.55 (-3.01)***	-0.67 (-4.11)***	-0.12 (-1.56)		-0.14 (-2.28)**	0.02 (1.4)	0.03 (1.49)	-0.02 (-1.24)	-0.03 (-2.41)**
Lagged endogenous	0.37 (3.11)***	0.33 (7.33)***	0.5 (4.73)***		0.66 (3.71)***	0.77 (10.21)***	0.74 (7.84)***	0.63 (6.55)***	0.61 (3.14)***
R2	0.85		0.87			0.82		0.93
Individual fixed effects	Yes (0.0009)		Yes (0.008)			Yes (0.0717)		Yes (0.0297)
Period fixed effects	No		No			Yes (0.0772)		No
Wald	0.0118
Pesaran CD	0.1350
B-G test	0.8532
Hansen test		0.3052			0.6803		0.6356		0.7494
A-B AR(2)		0.3101			0.6226		0.1620		0.1576
Observations	64	58	64		58	64	58	64	58

	Economic affairs		Environmental protection			Housing and community amenities		Health
Method	OLS	GMM	OLS	GMM		OLS	GMM	OLS	GMM
Output gap	-0.07 (-0.48)	0.06 (0.51)	0.002 (0.22)	0.001 (0.15)		-0.01 (-0.45)	0.01 (0.27)	-0.07 (-2.57)**	-0.1 (-5.61)***
Lagged endogenous	0.2 (1.59)	0.1 (0.68)	0.24 (2.16)**	0.48 (3.09)***		0.35 (3.13)***	0.3 (1.79)*	0.42 (3.56)***	0.12 (0.82)
R2	0.45		0.88			0.94		0.79
Individual fixed effects	Yes (0.0128)		Yes (0.0000)			Yes (0.0000)		Yes (0.0029)
Period fixed effects	No		No			No		No
Hansen test		0.8943		0.0810			0.1551		0.2843
A-B AR(2)		0.2414		0.2150			0.8262		0.1292
Observations	64	58	64	46		64	58	64	58

	Recreation, culture and religion		Education			Social protection
Method	OLS	GMM	OLS	GMM		OLS	GMM
Output gap	-0.004 (-0.33)	-0.01 (-2.7)**	-0.03 (-1.68)*	-0.03 (-2.23)**		-0.21 (-3.65)***	-0.27 (-1.96)*
Lagged endogenous	0.59 (5.08)***	0.34 (4.04)***	0.72 (9.04)***	0.74 (14.52)***		0.5 (4.45)***	0.23 (0.86)
R²	0.92		0.94			0.93
Individual fixed effects	Yes (0.0513)		Yes (0.0484)			Yes (0.0051)
Period fixed effects	No		No			No
Hansen test		0.0921		0.0662			0.4226
A-B AR(2)		0.3618		0.5178			0.1556
Observations	64	46	64	58		64	46

Note: Redundancy F-test p-values for individual fixed effects and period fixed effects is reported in respective parenthesis. ***, **, * indicate statistical significance at 1%, 5% and 10%, respectively. T-statistics computed using OLS residuals is reported in parenthesis. Instruments in GMM are constructed for the lagged dependent variable from the second and third lagged values in the form of differences in all estimates, except for Health, Environmental protection and Recreation, culture and religion where we use the third and fourth lagged values. Additionally, third and fourth lagged values in the form of levels are applied as instruments for Recreation, culture and religion, Environmental protection and Social Protection. Lastly, period fixed effects are applied in the case of Housing and community amenities, Environmental protection and Social Protection.

Table 3
Specifications of models estimating determinants of expenditure functions

Dependent variable	Independent variable of interest	Controls	Source
education (ratio of education expenditures to total public expenditures) health (same) and composition (ratio of education and health expenditures to total public expenditures).	decentralization (share of local to total exp)	Population population density age structure gross domestic product (GDP) per capita openness to international trade OECD membership dummy	del Granado, Martinez-Vazquez and McNab. (2018)
expenditure share in total expenditures	corruption convictions	log of state population the log of real state gross domestic product (GDP) per capita the percentage of state population aged 25+ with at least a high school diploma the percentage of state population between ages 0-17	Cordis (2014)
expenditures share of total expenditures	corruption perception index	interest rate on government bonds the population density the age-dependency ratio the log of real GDP per capita and the unemployment rate regional dummies for the South, the Midwest, and the West	Hessami (2014)
total expenditure / COFOG category	real GDP in national currency election years	lagged dependent population openness the age structure (share of young and elderly in total population) unemployment rate growth rate of total expenditures	Enkelmann and Leibrecht (2013)
Expenditure (share of GDP)	ln(population) ln(GDP per capita) openness OECD membership index of ethnic fractionalization fraction of population over 65		Ferreiro, Garcia-Del-Valle and Gomez (2009)
government transfers to households	party linkage	lagged dependent age unemployment total expenditures federalism dummy district magnitude	Lago-Peñas and Lago-Peñas (2009)
education expenditures	corruption index		Mauro (1998)

Source: Authors’ literature review.

Table 4
Variable description and data sources

Variable	Definition	Description	Source
PGGA	Public goods and general administration	Aggregation of General public services, Defence, Public order and safety, and Environmental protection, measured in GDP %	National Financial Institutions, Eurostat
SE	Social expenditure	Aggregation of Housing and community amenities, Health, Recreation, culture and religion and Social protection, measured in GDP %	National Financial Institutions, Eurostat
PE	Productive expenditure	Aggregation of Economic affairs and Education, measured in GDP %	National Financial Institutions, Eurostat
ELECTIONS	Parliamentary elections	Dummy variable taking value of 1 for parliamentary election year, and 0 for other	National Election Commissions
PARTY_NAT	Party nationalization index	The party nationalization index calculated as per Bochsler (2010), where politically decentralized countries are described with a lower index value	National Election Commissions
CORRUPT	Corruption perception index	The corruption perception index, where less corrupt countries are described by a higher index value	Transparency International
GDPEUR	Gross Domestic Product	Gross Domestic Product in millions of euros, at current market prices	Eurostat
OPEN	Trade openness	Trade openness index, where higher values are described for more open economies	Eurostat
UNEM	Unemployment rate	Percentage of population aged over 15 years that is unemployed	International Labour Organization
TOTEXP	Total expenditures	Total expenditures, measured in GDP %	National Financial Institutions, Eurostat

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