Fiscal transfers in Turkey: Do politics matter?

Neyaptı, Bilin; Oluk, Begüm Özdemir

doi:10.1016/j.ecosys.2021.100909

“…This leads to local transfer allocations becoming economically inefficient and thus reduces welfare. Indeed, there is ample empirical evidence showing that redistribution decisions tend to be systematically related to electoral incentives (see, inter alia, Dellmuth and Stoffel, 2012;Solé-Ollé and Sorribas-Navarro, 2008;Arulampalam et al, 2009;Brollo and Nannicini, 2012;Herwartz and Theilen, 2014;Bracco et al, 2015;Neyapti and Oluk, 2021). For a broader discussion of the political economy of intergovernmental transfers, see also Inman and Rubinfeld (1996), Khemani (2007) and Sato (2007).…”

Section: Introductionmentioning

confidence: 99%

Fiscal Decentralization, Political Heterogeneity and Welfare

Aslım¹,

Neyaptı²

2022

Prague Economic Papers

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This paper contributes to the literature on fiscal decentralization by presenting a formal model of the interaction between the central and local governments (CG and LGs, respectively) where LGs may differ in their degree of political alignment with CG. The non-cooperative optimal behaviour of the agents reveals that optimal tax increases with the extent of fiscal decentralization (FD), political unison and spillovers across localities, while LGs' optimal tax collection effort is negatively associated with all of these parameters. The first novel finding of our study is that both welfare peaks and income distribution are more equitable at a lower level of FD in the case of spillovers than in the case of no spillovers, which supports the decentralization theorem. The second novel finding is that both the amount of redistributable income and central government utility increase with the degree of political unison.

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“…This leads to local transfer allocations becoming economically inefficient and thus reduces welfare. Indeed, there is ample empirical evidence showing that redistribution decisions tend to be systematically related to electoral incentives (see, inter alia, Dellmuth and Stoffel, 2012;Solé-Ollé and Sorribas-Navarro, 2008;Arulampalam et al, 2009;Brollo and Nannicini, 2012;Herwartz and Theilen, 2014;Bracco et al, 2015;Neyapti and Oluk, 2021). For a broader discussion of the political economy of intergovernmental transfers, see also Inman and Rubinfeld (1996), Khemani (2007) and Sato (2007).…”

Section: Introductionmentioning

confidence: 99%