Exploring the Effect of Governance Dimensions on Rationalization of Public Budget

This study empirically investigates the impact of good governance dimensions on the rationalization of the public budget in Palestine over the period 2002–2023. Grounded in Legitimacy Theory, the research emphasizes the role of stakeholder acceptance in promoting transparency, accountability, and effective public resource allocation. Using multiple regression analysis on time series data, a Random-Effects Model (REM) was employed alongside diagnostic tests to address issues of multicollinearity, heteroscedasticity, and autocorrelation. The findings reveal that Government Effectiveness has a positive and statistically significant effect on budget rationalization, while the Rule of Law demonstrates a significant but negative influence—suggesting deficiencies in the fair and transparent enforcement of legal frameworks. Other governance dimensions, including Voice and Accountability, Political Stability, Regulatory Quality, and Control of Corruption, did not show statistically significant effects, reflecting ongoing challenges in governance implementation. The study underscores the need for institutional and legal reforms to enhance governance quality and fiscal balance. It also highlights the importance of public awareness and participation in financial decision-making, which can foster greater transparency, accountability, and trust in public institutions, ultimately contributing to improved socio-economic outcomes in Palestine.