politicians to spend on. Both variables _POLITY_ and _lnPOP_ can therefore be reclassified as contributors to the common pool problem.<sup>45</sup>

**<u>TABLE 11—FRACTION OF BUDGET ACCURATELY SPENT,</u>** **_<u>fb</u>_**

|||**Encomp**<br>**Equatio**|**assing**<br>**n 11a**|**Bayesian**<br>**k/K =**|**Outcomes**<br>**14/17**|**Preliminary**<br>**11**|**Equation**<br>**b**|
|---|---|---|---|---|---|---|---|
||**Hypothesized**|||||||
||**Signs**|**Coeff.**|**Prob. **|**PIP**|**Mixed-t 1/**|**Coeff.**|**Prob. **|
||**1**|**2**|**3**|**4**|**5**|**6**|**7**|
|_Constant_|..|33.136|0.319|..|..|20.1439|**0.007**|
|Aggregate Deviations, |_e_||−|-0.717|**0.000**|**1.000**|**-4.355**|-0.7408|**0.000**|
|_PCT_INT_|−|0.047|0.733|0.321|0.278|..|**..**|
|**Common Pool**||||||||
|_H01 FCTN_ETHN_|−|-0.306|**0.000**|**1.000**|**-4.560**|-0.2241|**0.000**|
|_H01 FCTN_LANG_|−|-0.043|0.535|0.348|-0.293|..|**..**|
|_H01 FCTN_RELIG_|−|0.123|**0.048**|**0.856**|1.562|..|**..**|
|_H02 DRY_|−|0.163|0.151|0.573|0.799|..|**..**|
|_H02 DRO_|−|0.283|0.510|0.335|0.266|..|**..**|
|_H03 PCT_CSE_|−|-0.007|0.951|0.330|-0.312|..|**..**|
|**Political Institutions**||||||||
|_H04 POLITY_|+|-0.715|**0.043**|0.778|-1.278|..|**..**|
|_H05 MPP_|+|0.330|**0.000**|**0.995**|**2.953**|0.1892|**0.000**|
|_H06 SYSTEM_|+|-0.382|0.914|0.315|0.197|..|**..**|
|_H07 PR_|+|0.950|0.781|0.357|0.359|..|**..**|
|**Capacity for PFM**||||||||
|_H08 PEFA_|+|11.488|**0.005**|**0.947**|**2.200**|9.2921|**0.001**|
|_H09 ln(POP)_|+|0.405|0.689|0.377|0.380|..|**..**|
|_H10 ln(GNIPC)_|+|-3.907|0.179|0.620|-0.876|..|**..**|
|_H11 ODAGDP_|+|-29.687|**0.074**|0.601|-0.843|..|**..**|
|_ln(BATTLE)_|−|0.851|0.301|**0.853**|1.575|..|**..**|
|Burundi 2005||40.369|0.007|..|..|49.740|**0.000**|
|Uganda 2006-07||41.068|0.004|..|..|51.093|**0.000**|
|Observations||144||144||144||
|R-squared||0.537||||0.479||
|Adjusted R-squared||0.466||||0.456||
|S.E. of regression||12.990||||13.110||
|Sum squared resid||20,923||||23,547||
|Log likelihood||-563||||-571||
|<br>F-statistic||7.557|**0.000**|||20.949|**0.000**|
|Normal error term 2/||0.600||||**0.752**||
|Heteroskedasticity Test 3/||0.409||||**0.849**||
|Omitted Variable Test 4/||0.019||||0.001||

1. Unconditional inclusion.

2. Jarque-Bera probability.

3. White n∙R<sup>2</sup> probability (without cross terms).

4. Ramsey RESET F-statistic probability (1 term).

# _C. Compositional Expenditure Deviations_

The results of the analysis for aggregate expenditure deviations are shown in Table 11. Column 1 shows the hypothesized signs for each independent variable in equation 9. Columns 2 and 3 show the results for an encompassing equation 11a that includes all 17 hypothesized variables. Columns 4 and 5 show the results of the Bayesian averaging. Columns 6 and 7 show the author’s preferred equation 11b, based on the Bayesian outcomes. Four variables are indicated for inclusion on the basis of their PIP scores. Each are robustly significant (PIP > 14/17 _and_ |unconditional mixed t- statistics| > 2). As an additional test of robustness, all outlier observations were investigated to see if any acted as influential points: none proved to do so. Two of these, however, do skew the

> 45 This does not need negate the scale effect found by de Renzio (2007) where PEFA scores are positively correlated with population size.  It may be that this remains true but the impact of the common pool problem overwhelms the scale effect.

35