An examination of consumption expenditures in Turkey within the framework of the behavioral economics approach: A panel data analysis

Consumption expenditures are examined across a wide spectrum, ranging from individual decision-making processes to nationwide economic indicators. These expenditures serve as one of the fundamental determinants of economic activity and play a significant role in shaping macroeconomic balances. While classical economic theory primarily explains consumption through variables such as income, prices, and interest rates, behavioral economics offers a broader perspective by emphasizing the influence of cognitive biases, emotional tendencies, and social interactions. Particularly at the regional level, consumption patterns are significantly shaped by cultural norms, local values, and social structures. In this context, the study aims to uncover the irrational responses and multi-layered dynamics underlying consumption decisions. The analysis employs a panel data set covering Turkey's NUTS-1 regions for the period 2010-2023, examining the determinants of consumption expenditures from both economic and socio-demographic dimensions. Panel unit root tests, cointegration analysis, and the FMOLS method are utilized to evaluate long-term relationships, while causality among variables is tested through panel causality analyses. The first model incorporates traditional economic variables such as income, credit volume, prices, wealth, and employment, whereas the second model focuses on socio-demographic factors including income inequality, female population ratio, education level, household size, and employment. Findings reveal that consumption decisions cannot be solely explained by economic indicators like income and prices; structural and behavioral factors such as education, income inequality, and gender also play a decisive role. Furthermore, the variables in both models reflect region-specific psychosocial tendencies, as evidenced by coefficients and significance levels. The study thus offers regionally informed and realistic policy recommendations by evaluating consumption economics through both rational and irrational behavioral lenses.