Budgetary efficiency in Turkey: local-central government relations from the perspective of fiscal federalism

Abstract

The role and the functions of different levels of government are controversial issues. Together with increasing the importance of the local governments, decentralization has also gained importance. In this study, we examine local-central government relationships in Turkey, which has a strongly centralized government structure, by inspecting the status of decentralization. We empirically investigate the critical points mentioned in traditional fiscal federalism theories by using a provincial data set. Our study briefly reveals that there has not been a trend toward expenditure decentralization in Turkey. Although a slight trend toward tax decentralization is observed, local governments in Turkey do not have ability to improve their own revenues. In addition, we do not see any significant compensatory policy of the central government against the shocks realized in the macroeconomic environment. A supporting policy of the national government is observed in the priority regions for development and in agricultural regions. Finally, our study on social indicators showed that there are significant uneven distribution of health facilities and inequalities among different income groups. In education case, we observe that education facilities are more even across provinces as compared to health facilities