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Fiscal transfers in Turkey: Do politics matter?

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  • Neyapti, Bilin
  • Özdemir Oluk, Begüm

Abstract

Local fiscal transfer rules in Turkey were revised in 2008, such that, while a significant portion of transfers continued to be based on population size, the remainder was distributed based on other criteria such as the development index. In this paper, we investigate the extent of fiscal fairness in Turkey during the period 2008–2012. We define fiscal fairness by the degree of association of transfers and local spending with the structural and socioeconomic indicators, as opposed to political-party associations. Our empirical analysis reveals that while local fiscal transfers during the investigated period were significantly correlated with the socioeconomic and structural indicators, political factors also played a significant role. Particularly, we find robust evidence that cities where the incumbent party-AKP (Justice and Development Party), who won significantly more votes in the general elections than the main opposition party-CHP (Republican People's Party), received significantly more transfers and fiscal spending than the rest. The evidence also suggests that the metropolitan municipalities held by CHP received significantly more government expenditure than the rest; though less robust than the former. This observation also holds for the metropolitan municipalities held by AKP. Additionally, we observe that cities with metropolitan municipalities that were governed by either the incumbent or the main opposition party, were less fiscally independent than the rest. We also note, however, that given the increasing opacity in data reporting, this study does not account for the large amounts of public funds that are allocated in tenders with special invitees, via public–private partnerships or in the form of social assistance, although they are also likely to constitute a major component of politically-biased fiscal transfers during the study period.

Suggested Citation

  • Neyapti, Bilin & Özdemir Oluk, Begüm, 2021. "Fiscal transfers in Turkey: Do politics matter?," Economic Systems, Elsevier, vol. 45(3).
  • Handle: RePEc:eee:ecosys:v:45:y:2021:i:3:s0939362521000571
    DOI: 10.1016/j.ecosys.2021.100909
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    References listed on IDEAS

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    1. Zafer Akin & Zeynep B. Bulut-Cevik & Bilin Neyapti, 2016. "Does Fiscal Decentralization Promote Fiscal Discipline?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(3), pages 690-705, March.
    2. Serdar Yilmaz & Ayse Guner, 2013. "Local Government Discretion And Accountability In Turkey," Public Administration & Development, Blackwell Publishing, vol. 33(2), pages 125-142, May.
    3. Lockwood, Ben, 2005. "Fiscal Decentralization: A Political Economy Perspective," The Warwick Economics Research Paper Series (TWERPS) 721, University of Warwick, Department of Economics.
    4. Neyapti, Bilin, 2010. "Fiscal decentralization and deficits: International evidence," European Journal of Political Economy, Elsevier, vol. 26(2), pages 155-166, June.
    5. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    6. Serdar Yilmaz & Varsha Venugopal, 2013. "Local Government Discretion And Accountability In Philippines," Journal of International Development, John Wiley & Sons, Ltd., vol. 25(2), pages 227-250, March.
    7. Ansolabehere, Stephen & Gerber, Alan & Snyder, Jim, 2002. "Equal Votes, Equal Money: Court-Ordered Redistricting and Public Expenditures in the American States," American Political Science Review, Cambridge University Press, vol. 96(4), pages 767-777, December.
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    More about this item

    Keywords

    Local fiscal transfers; Turkey;

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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