The Effect of Socio-Economic Variables on Public Sector Performance: An Empirical Analysis on Public Expenditure in Turkey

Abstract

Public sector performance is regarded as the impact of government activities on certain key economic and social indicators, that is, the outcome of public sector activities. In this respect, the share of public expenditures, which is considered as one of the most important indicators of the size of the public sector, in the gross domestic product is also considered as a powerful tool in terms of revealing the public sector performance. There are many studies in the literature examining the effect of public expenditures on socioeconomic variables. In this study, different from other studies in the literature, the effects of socio-economic variables on public expenditures were investigated. Thus, it is aimed to determine the effects of socioeconomic variables on public performance through public expenditures. For this purpose, the effects of the net public debt stock, the human development index, and the unemployment rate on public expenditure were analyzed by cointegration tests for the 1990-2018 period in Turkey. Empirical results obtained reveal that there is a long run relationship between variables. Accordingly, increases in net public debt stock and human development index increase public expenditures, while increases in the unemployment rate create a decrease in public expenditures.