Economics Research

Abstract  Financial instability poses a challenge for developing countries, particularly oil-dependent developing nations, due to their reliance on windfall oil revenues. During periods of abundant oil income, governments tend to increase spending under political pressures, while during times of declining revenues, they struggle to reduce expenditures proportionally due to spending rigidities. In this context, institutional quality appears to influence fiscal sustainability by fostering fiscal discipline. Accordingly, this study examined the impact of institutional quality on fiscal sustainability in 11 oil-producing developing countries and 16 non-oil developing countries from 2010 to 2020, using panel regression models and the PCSE technique. To measure institutional quality, three indicators were used: control of corruption, rule of law, and regulatory quality, while fiscal sustainability was measured by budget deficit volatility. The estimation results indicate a negative relationship between budget deficit volatility and institutional quality indicators. Furthermore, a comparative analysis revealed that the effects of corruption control and regulatory quality are stronger in oil-producing developing countries, whereas the rule of law has a greater impact on budget deficit volatility in non-oil developing countries.
Introduction
The mismatch between the growth of government revenues and expenditures has turned fiscal instability into a serious challenge in developing countries, particularly in many oil-dependent developing nations. In these countries, governments control windfall oil revenues and, disregarding their finite and volatile nature, expand their expenditures—especially consumptive spending—to gain political support, thereby exacerbating fiscal instability. Iran, too, has faced fiscal instability due to its long-term reliance on windfall oil revenues, which the government has used to expand consumptive expenditures (through hiring, wage payments, subsidies, etc.), as well as to finance the legacy of the eight-year Iran-Iraq war. Therefore, this research aims to examine how institutional quality affects the fiscal sustainability of governments and how this effect differs between oil-rich and non-oil developing countries.
Method
The present study estimates the aforementioned model once for oil-rich developing countries and once for non-oil developing countries using panel data models and the PCSE technique, with Stata 17. After estimating the models, the results of the two models were compared using a Z-test.
Results
Since the Hausman test confirmed the fixed-effects model, the Wald test confirmed the presence of heteroskedasticity, and the Wooldridge test confirmed first-order autocorrelation in the error terms for both groups of countries, and given that the number of cross-sections (N) is larger than the time periods (T), the PCSE estimator is used for estimation. The results for oil-rich developing countries indicate a negative relationship between the rule of law, corruption control, regulatory quality, and budget deficit fluctuations. In non-oil developing countries, a negative relationship between institutional quality indicators and budget deficit fluctuations was confirmed. A comparison of the results between the two groups shows that the impact of corruption control and regulatory quality on budget deficit fluctuations is stronger in oil-rich developing countries.
Conclusion
According to the findings, the effects of corruption control and regulatory quality on budget deficit fluctuations are stronger in oil-rich developing countries, while the effect of the rule of law is stronger in non-oil developing countries.
 

Abstract The purpose of this paper is to identify factors affecting tax evasion with emphasis on financial development. For this purpose, we estimate an ARDL model for the period 1978 to 2014. Our results show that, at first, there is a long-run relationship between tax evasion and explanatory variables (financial development, literacy rate, government size and industry value added (%GDP). Secondly, financial development has a significant negative effect (in short-run and long-run) on tax evasion. In other words, higher financial development leads to lower tax evasion. This finding is consistent with the theoretical expectation. Thirdly, literacy rate, government size and industry value added (%GDP) have a significant negative effect on tax evasion. That means tax evasion is decreases by increasing each of them. Also, the variables of GDP per capita and tax complexity did not have a significant effect on tax evasion.

Abstract In the mixed economic and natural resource domain, transactions on commodities, services and natural resources (water and land) are in either visible or invisible (hidden) layers. The prevailing monetary systems of macro and sectoral accounting take into account only market transactions and therefore neglect invisible transactions like intersectoral water consumption. Such a deficiency provides the ground for policymaking and water resource management to focus their attention on the aggregate data, e.g. agriculture consumes directly more than 90 percent of the total water resources. In this paper, on the basis of the extended Input – Output model, we use two approaches; namely: quantity and mixed quantity–value approaches. By using the aggregated quantity-value based Input – Output table and corresponding sectoral consumption of water (billion liters) for the year 1990, we found that sectoral water consumption multipliers and the intersectoral water consumption provide more suitable criteria for policy implications as well as for managing the consumption of water resources of the country. In addition, the agro-based industries have the largest water consumption multipliers. With respect to the hidden layer of intersectoral water consumption we found that  agriculture sector supplies 92.5 percent of the total water resources while demanding 58 percent of these resources.