How do fiscal and administrative capacities influence sustainable development? A panel approach for Central and Eastern European countries

Abstract Over the past decade, sustainable development has been a central focus of political, social, and economic agendas for policymakers and international organizations. However, generating the necessary resources and allocating them effectively remain major challenges in achieving the global Sustainable Development Goals (SDGs). Using the Driscoll-Kraay standard errors model, this study analyzes the effect of fiscal and administrative capacities, which are the key mechanisms for resource creation and effective resource allocation, on sustainable development for 15 Central and Eastern European (CEE) countries between 2007 and 2020. The empirical findings reveal that fiscal and administrative capacities have a positive impact on sustainable development across all CEE countries. However, when differences in levels of development are considered, the influence of both fiscal and administrative capacity becomes insignificant in developing CEE countries, while remaining positive and significant in developed CEE countries. This pattern indicates that the positive contributions of fiscal and administrative capacity in CEE countries are primarily derived from those that are more developed. These findings highlight the significance of fiscal and administrative capacities in influencing sustainable development in CEE countries, while also indicating that coordination within these countries is crucial for achieving the SDGs. This is the first study to analyze the effects of both fiscal and administrative capacity on sustainable development within an institutional framework.