Where should we spend government’s money? the effect of public sector investments on socioeconomic development in turkey

In this paper, we analyze the effects of area-specific public investments through 1999-2002 in 76 provinces of Turkey on their socioeconomic development through the period 1996-2003. We consider public investments in areas of agriculture, health, education, transportation, telecommunication and others. Our objective is to find the area of public investments that has provided the largest socioeconomic improvement per lira invested in the relevant period. Given the scarce resources and a bitter history of budget deficits of the Turkish public sector, it is crucial for the policymaker to know which investment area yields the largest welfare improvement per lira invested. To find out, we use ordinary least squares and nonparametric estimation methods. The results from both methods reveal that on average, education investments have a positive significant effect on socioeconomic status of a province per lira invested. Investments in other areas appear to be insignificant in the period considered. The results emphasize the importance of policymaker's choice of which area to invest the next lira available.

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Public Expenditures ,

Socioeconomic Development ,

Turkey ,