Table 8. Regressions with fiscal variables – total local per capita spending/expenditure

||(1)|(2)|(3)|(4)|(5)|(6)|
|---|---|---|---|---|---|---|
|∆Total Local Spending per capita|0.0165<br>(0.0226)|0.0368<br>(0.0289)|||||
|∆Total Local Spending per capita*West|||-0.0191<br>(0.0182)|-0.0178<br>(0.0234)|||
|∆Total Local Spending per capita *East|||0.118***<br>(0.0192)|0.121***<br>(0.0388)|||
|∆Total Local Spending per capita*R1|||||0.0410<br>(0.0338)|0.0701*<br>(0.0393)|
|∆Total Local Spending per capita*R2|||||-0.0140<br>(0.0107)|-0.0231<br>(0.0279)|
|∆Total Local Spending per capita*R3|||||-0.00770<br>(0.0127)|-0.0107<br>(0.0176)|
|Constant|-0.00774***|-0.00551**<br>|-0.00730***|-0.00569**|-0.00783***|-0.00685***|
||(0.00165)|(0.00243)|(0.00153)|(0.00218)|(0.00160)|(0.00231)|
|Sector Shares||X||X||X|
|Observations|156|104|156|104|156|104|
|R-squared|0.007|0.168|0.125|0.336|0.029|0.274|
|_Notes_: R1=Rest of the country, R2=Anato<br>sector controls are over the period 2007-2<br>** p<0.01|lian Tigers, R3=<br>013. Regressio|developed west.<br>ns using sector c|Results from<br>ontrols are li|Equation 3 ar<br>mited to 200|e shown. Regr<br>7-2011. + p<|essions without<br>0.10, * p<0.05,|
|_Source_: Ministry of Finance, LFS, SILC|2007-2011; auth|ors’ calculations|.||||

Table 27 illustrates results regressing by disaggregated central and local expenditures categories. Results using the OECD regional groupings are excluded since the R-squared is lower and regional interactions with fiscal expenditures are insignificant. At the national level, government personnel, social security payments, and purchases are related to poverty reduction. However, social security payments are only poverty reducing in the west. While personnel and purchases are poverty reducing in both the east and west. Sector and economic growth is still more important in explaining changes in poverty; the R-squared increases when including sector growth GVA variables.

Table 28 illustrates results using local fiscal expenditures, and there are even less explanatory items. Which is consistent with regressions on total central and local expenditures, that local expenditures are less correlated to changes in poverty. Interestingly, Anatolian tiger regions have low amounts of central spending compared to the Developed West or the Rest of the Country (Figure 27).

# **4. Conclusion**

This paper examined poverty rates, poverty convergence, and determinants for Turkey at the NUTS2 level from 2006 to 2013. There is strong regional variation in regional poverty reduction. Poverty reduction across the country benefited from growth in the agriculture sector from a GVA standpoint. On the other hand, employment numbers show that increases in the services sector have a statistically significant relationship with poverty reduction across the entire country. When comparing these two effects, it is also important to bear in mind that job creation, which is captured by employment, was the main driver of poverty reduction (consumption based) in Turkey between 2002 and 2012.

In terms of government spending, increases in central spending are significantly more correlated with poverty reduction than the rise in expenditure at the local level. However, the causality of this relationship is not clear. Spending at the local level might be increasing as a response to higher poverty rates in the region. Another complicating factor is the high level of aggregation in the spending data. Despite the analysis conducted at the functionally disaggregated levels, a deeper breakdown that identifies expenditure 27