Do political factors matter for regional development? Evidence on the central-local partisan alignment in Turkey during AKP ruling

The importance of political local coalitions in shaping local governance structures conducive to economic growth has been a subject of research for numerous years, both in rich economies as well as in emerging countries. In spite of such amount of research, little attention has yet been paid to the political relations between the central state and the local coalitions, as well as the role of political conflicts between such levels, in hampering local and regional economic performance. Very recently scholars have argued that in countries where political factors may play a strong role in providing privileged treatment to people and constituencies with the right political affiliation, tense central/local relationships may inhibit local governance structures in promoting growth. The channels through which such impact may generate include providing particular incentives to neighboring aligned regions so as to stimulate investments' relocations, unfavorable treatment of nonaligned businesspeople via legislative and administrative mechanisms, and reducing the amount of public investments necessary for development. The current paper will exactly try to test such prediction by exploring whether tense central-local political relationships ? which will be proxied by the level to which local constituencies are politically unaligned with the government ? determined slower regional economic growth. To this aim the paper will define a model of political economic growth accounting for standard socio-economic determinants of regional economic growth, as well as political alignment variables, and test it to the 81 provinces of Turkey during the period 2004-2011. Turkey provides an interesting setting to test the research puzzle because of the highly heterogeneous regional economic trends recorded in recent years, as well as the increasing political polarization that has occurred between the opposition political parties and the government led by the Adalet ve Kalkinma Partisi (Justice and Welfare Party, AKP) since 2002. Preliminary results do indeed seem to suggest that after controlling for socio-economic factors, and for time-invariant province-specific unobservable characteristics, areas politically unaligned with the central government grew slower over the period 2004-2011. At the same time, however, the magnitude of such political impacts on regional economic performance is significantly smaller than the one of regional socio-economic factors, suggesting that politics is not a key determinant behind regional growth trends.