This study examines the impact of key governance dimensions on public budget rationalization in Palestine from 2002 to 2023. Utilizing Legitimacy Theory, the research assesses how institutional quality affects fiscal outcomes, including revenues, expenditures, net lending, and budget balance. Time-series data from the Palestinian Ministry of Finance and the World Bank’s Worldwide Governance Indicators were analyzed using multiple regression techniques. The results indicate that Rule of Law exhibits statistically significant effects across multiple fiscal dimensions, while Government Effectiveness shows a significant positive impact on public revenues and a marginal effect on budget balance. In contrast, Political Stability, Control of Corruption, Voice and Accountability, and Regulatory Quality do not demonstrate statistically significant effects within the multivariate framework. These findings underscore the importance of strengthening administrative capacity and legal enforcement mechanisms to improve fiscal discipline, particularly in politically fragile environments. Policy implications emphasize enhancing institutional effectiveness and reinforcing legal predictability while supporting broader structural reforms for sustainable public finance management in Palestine.
Alsaffarini et al. (Tue,) studied this question.