Tax capacity and state institutions: The case of the Balkan countries and Turkey

Tax capacity and the quality of public institutions is one of the issues that are emphasized. Tax capacity, the maximum limit that countries can collect taxes; the quality of public institutions, on the other hand, expresses the productivity and efficiency of the institutions in the provision of services based on several indicators. Both phenomenons are affected by various factors. The existence of a relationship between tax capacity and public institutions results in an improvement or a deterioration in both, affecting each other. Countries produce policies to improve both notions. In this study, the relationship between tax capacity and the quality of public institutions was examined using the data between 2008-2019 for Turkey and the Balkan countries. In the study, Dumitrescu & Hurlin (2012) Granger Causality Analysis was used and the causality relations between the tax capacity and the variables determining the quality of public institutions were tried to be revealed.