Fiscal Decentralization or Centralization: A Comparative Study on Turkey and Argentina

Abstract

This paper analyses the fiscal performance in both Turkey and Argentina in the last 15 years, when both countries faced rapid economic growth and witnessed its huge impact on social welfare. This work explored two different systems: Centralization in Turkey and Federalism in Argentina and, in general, studied the decentralization impact of both systems on social welfare. In particular, this study intended to create new social welfare indexes in the case of both governments decide to allocate resources to different regions of these countries. To do that firstly, a regional Human Development Index (HDI) for each region in every country was built. This attempt is considered a new contribution to the literature and intended to fill the gap in this field. Afterward, this index was compared with the fiscal resources allocation (FRA), used as a proxy of fiscal decentralization in an econometric data panel model. After analysing the impact, it was concluded that the social welfare indexes determine the fiscal resource allocation in the Federal system, such as in Argentina, but not in the centralized system such as in Turkey during the period analysed from 2000 to 2015.