The Effect of Local Fiscal Variables On Spatial Choice In The Framework of the Tiebout Hypothesis: The Case of Turkey

The discussion of by which government level and how much local public goods and services should be provided has been one of the important theoretical issues of local government finance. The Tiebut model takes the lead among the hypotheses that explain that local governments have an important role in ensuring efficiency in resource allocation. Based on the assumption that consumer-voters have mobility and full knowledge, the Tiebout model suggests that these individuals would move to the communities that reflect the patterns of consumption on local public goods and services in the best way, and that this moving action would take place until each community reaches optimal size. The model, thus, concludes that local services will ensure efficiency of resource allocation through a private market-like mechanism. The Tiebout model has been led to empirical measurement of many different issues, such as the impact of local fiscal variables on spatial preferences, the public service preferences of individuals, the internal migration motif, the housing prices, and the tax capitalization. The aim of this study is also to test the relationship between local fiscal variables and settlement preferences within the framework of the Tiebout model. Therefore, this study aims to analyze the effects of local fiscal, economic and social variables on spatial choice (net migration rate), using panel data techniques for the 2008-2017 period in 81 provinces of Turkey. In the analysis, it was found that net migration rate has a negative relationship with per capita local tax revenue, per capita local expenditure and crime rate, while a positive relationship with local GDP per capita. And this result corroborates the Tiebout model in terms of local tax revenues.

Keywords

Fiscal Federalism, Fiscal Decentralization, The Tiebout Model, Panel Data Analysis.