Identification the Hypotheses for Explaining Public Sector Growth in OIC Member Countries

Document Type : Research Paper

Authors

1 lorestan university

2 Assistant Professor, Department of Economics, University of Lorestan

Abstract

The main purpose of this article is to answer this question that by considering the hypotheses all together for explaining public sector (government) growth, which one is suitable to explain the public sector growth in Organization of the Islamic Conference (OIC) Member Countries over the periods 1996-2014? For this purpose we focused on 12 hypotheses, including: Wagner hypothesis, Baumol hypothesis, globalization, fiscal decentralization, income inequality, Kau and Rubin, financial illusion, size of the country, democracy, demographic and political institutions and conflict. The method used is Bayesian Model Averaging approach (BMA), due to convenience feature to consider the uncertainty assumption of model. With estimation of 100000 regressions and Bayesian averaging of coefficients, hypotheses for explaining public sector are specified. Based on the results, population (As an indicator of the country size) and dependency ratio (as a demographic variable) with positive and negative signs have a certain effect on public sector size, respectively. The impact of land area (As another indicator of the country size) and economic globalization on public sector size are relatively important with positive signs. Also, negative and important coefficients of dummy variables used in the model shows that countries with a federal structure (fiscal decentralization indicator) and countries with presidential systems (as a political institution) have a smaller public sector size than the other countries studied.
JEL Classification: C11, F1, H5

Keywords

References

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History

  • Receive Date: 27 December 2016
  • Revise Date: 11 November 2017
  • Accept Date: 26 December 2017

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