Structural determinants of government budget deficits in developing countries

The purpose of this study is to examine the possibility that certain structural factors make some developing countries more likely to incur government budget deficits than others. Empirical evidence is provided to support the hypotheses that developing countries are likely to have larger government budget deficits the lower their level of economic development, the greater the degree of government participation in the economy, and the less control exercised over government expenditures. Less convincing support is given for the hypothesis that revenue instability contributes to government budget deficits. An unexpected result of the study is that growth of government revenues is positively related to budget deficits, which leads the author to consider the possibility of a ‘Please effect’.