THE EFFECT OF PUBLIC SECTOR INVESTMENTS ON SOCIOECONOMIC DEVELOPMENT IN TURKEY

Abstract

In this paper, we analyze the effects of public investments done between years 1999 and 2002 in 76 provinces (il) of Turkey on the socioeconomic development of those provinces during the period of 1996-2003. We consider public investments in the areas of agriculture, health, education, transportation and telecommunication and others. Our objective is to find which area of public investments has provided the largest socioeconomic improvement. Given the scarce resources and a history of large deficits of the Turkish government’s budget, it is indispensable for the policymaker to know which investment area yields the “largest” improvement per lira invested. In the analysis, we use ordinary least squares and nonparametric estimation techniques. The results obtained from both techniques are robust and point to the same direction: they show that public investments in education area have a significantly positive effect on the socioeconomic improvement of a province per lira invested. Investments in other areas appear to be insignificant in terms of development. The results emphasize the importance of the policymaker’s choice of which area to invest.