Fiscal Decentralization and Socio-economic Outcomes in Turkey: An Empirical Investigation

This study examines the status of fiscal decentralization and its relationship with socio-economic indicators in Turkey. As theoretical literature is ambiguous on the merits of fiscal decentralization, international evidence confirms this ambiguity by stressing the important role of administrative and political decentralization in obtaining the benefits of fiscal decentralization. Empirical evidence in this paper regarding the relationship between various socio-economic indicators and fiscal decentralization in Turkey, however, is mostly favorable. We observe that fiscal decentralization is positively related with both the level and the growth rate of output, and negatively related with personnel spending and the volatility in both central government spending and private investment. The positive association between expenditure decentralization and output volatility points at rooms for improvements with regards to transparency and accountability at lower levels of the government to reinforce the benefits of fiscal decentralization.Publisher's Versio