The relationship between decentralization and public expenditure composition in Turkey

The concept of fiscal decentralization entered the literature in the 1960s. It became very popular in 1980s especially in developing countries. Turkey also took steps affected by this current fiscal decentralization. If the literature is researched, it is seen that while studies investigating the relationship between fiscal decentralization and macroeconomic variables such as inflation, growth and development are in the majority, the number of studies examining the effects of the fiscal decentralization on the composition of public expenditure is limited. The aim of this study is to contribute to fill the gap due to the scarcity of studies investigating the relationship between fiscal decentralization and public expenditure composition for Turkey and to reveal the effects on the composition of public expenditure arising from fiscal decentralization practices. For this purpose, a time series analysis is made depending on quarterly data of 2007Q1-2018Q3 period in Turkey with a bounds test methodology. Results showed that current spending increases with the increase in fiscal decentralization in Turkey. While the relationship between fiscal decentralization and transfer expenditures is negative, no statistically significant relationship has been found for investment expenditures.