Table 7. Regressions with fiscal variables – total central per capita spending/expenditure

||(1)|(2)|(3)|(4)|(5)|(6)|
|---|---|---|---|---|---|---|
|∆Total Central Spending per capita|-0.114**<br>(0.0496)|-0.130**<br>(0.0565)|||||
|∆Total Central Spending per capita*West|||-0.138***<br>(0.0417)|-0.138***<br>(0.0458)|||
|∆Total Central Spending per capita *East|||0.0155<br>(0.0915)|-0.0440<br>(0.111)|||
|∆Total Central Spending per capita*R1|||||-0.135*<br>(0.0775)|-0.120<br>(0.100)|
|∆Total Central Spending per capita*R2|||||-0.172**<br>(0.0678)|-0.196**<br>(0.0801)|
|∆Total Central Spending per capita*R3|||||-0.0743**<br>(0.0320)|-0.0834*<br>(0.0442)|
|Constant|-0.000122|0.00417|-0.000161|0.00170|0.000470|0.00283|
||(0.00280)|(0.00405)|(0.00260)|(0.00348)|(0.00307)|(0.00474)|
|Sector Shares<br>Spatial Fixed Effects||X||X||X|
|Observations|156|104|156|104|156|104|
|R-squared|0.068|0.217|0.108|0.356|0.084|0.285|

_Notes_ : R1=Rest of the country, R2=Anatolian Tigers, R3=developed west. Results from Equation 3 are shown. Regressions without sector controls are over the period 2007-2013. Regressions using sector controls are limited to 2007-2011. + p<0.10, * p<0.05, ** p<0.01 _Source_ : Ministry of Finance, LFS, SILC 2007-2011; authors’ calculations.

Initial conditions can also be a strong explanatory factor of the degree of poverty reduction. What are the demographic characteristics such as average educational levels and health indicators? These “initial conditions” may help explain the differences across regions as well. To take into account these additional variables of interest, equation 5 includes a vector of Demographic and Fiscal variables.

Educational PSIA score is increasing but there literacy disparities. Despite increased spending on education in recent years, educational outcomes have not improved in the East. Western regions are by far much more literate than eastern regions. Between 2001 and 2011, per capita government investment in education shifted largely to underserved Eastern regions but educational attainment in these regions are still lagging (World Bank, 2014, Fig 7.10).

Controlling for additional characteristics of the region does not change results. Expanding estimates from Table 7, the addition of controls were added such as schooling enrollment rates, higher education staff, physicians per capita, female labor force participation, and employment shares by education type. The addition of these variables did not significantly change the role of central government spending or sectoral growth.

Table 8 illustrates complementary results from Equation (3) using local per capita expenditures. Local expenditures are not as explanatory of poverty changes as central spending; the R-squared from these regressions are much lower than regressions with central expenditures. Moreover, poverty is higher in the East when there is higher local expenditures. Local expenditures may not be as explanatory as central spending simply due to its smaller size and smaller impact on the local economy. Figure 27 and Figure 28 illustrate average central and local expenditures respectively and local expenditures are about a fourth or fifth the amount of per capita central spending.

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