GOVERNMENT EXPENDITURES WITHOUT GROWTH: THE CASE OF TURKEY

Orçun Söylemez,Özkan Zülfüoğlu

doi:10.30798/makuiibf.805079

Abstract

Share of government expenditures in the GDPs are increasing virtually everywhere. Available data for developed countries indicate that the beginnings of this upward trend date back to the mid-19th century. Interestingly, economic growth rates did not increase significantly over time despite the increases in government expenditures. Low income countries today spend more than the double of what today’s developed economies were spending on average in 1900. However, this is not helping them to converge to richer economies. Why are government expenditures increasing then? This question might have global pertinence but due to the variety of country-specific factors, it can be best studied on a single country level. In this article, the country of focal interest is Turkey. Five important variables that might affect government expenditures from different angles are evaluated regarding their contributions to the out-of-sample predictions of government expenditures using random forest methodology. Military expenditures are estimated as primarily important for determining the government expenditures in Turkey in the last fifty years, while tax collections happened to be the second most important factor affecting the ups and downs of government expenditures around a time-varying average line. Per capita income, urbanization and inflation also affect government expenditures in various ways.

Highlights

Share of government expenditures as a percentage of GDP has been rising for many decades in a significant number of countries with highly different characteristics
When we focus only on the developed countries, for which we have observations available for longer periods of time, we can clearly observe that the economic expansion of the states through the expenditures has been an uninterrupted process since the mid-19th century. This uninterrupted continuation of the upward trend in government expenditures, especially for the developed Western economies, is essentially a very intriguing fact since it so clearly shows us that the rise of the neoliberal ideas over the last four decades has hardly changed anything in terms of the global expansion of government expenditures even in the countries where neoliberal political and economic rhetoric and the subsequent emphasis on the “minimal state” have been so popular at least since the late 1970s
Government expenditures kept rising in several countries around the world for long

Summary

Introduction

Share of government expenditures as a percentage of GDP has been rising for many decades in a significant number of countries with highly different characteristics. When we focus only on the developed countries, for which we have observations available for longer periods of time, we can clearly observe that the economic expansion of the states through the expenditures has been an uninterrupted process since the mid-19th century (see Figure2) This uninterrupted continuation of the upward trend in government expenditures, especially for the developed Western economies, is essentially a very intriguing fact since it so clearly shows us that the rise of the neoliberal ideas over the last four decades has hardly changed anything in terms of the global expansion of government expenditures even in the countries where neoliberal political and economic rhetoric and the subsequent emphasis on the “minimal state” have been so popular at least since the late 1970s

Objectives

Results

Conclusion