Abstract:

In cases where there is a soft budget constraint, the institutions and organizations supported by the state may tend to increase their expenditures. Soft budget constraints arise when the central government is ready to meet all or part of the deficit in local governments. Local governments can see their financial problems as an opportunity. The behavior of expectation of financial recovery may become permanent. This expectation causes them to spend more than they can afford. What needs to be done is to ensure that steps are taken to increase the efforts of local governments to earn their own income. The central government should state that it will not help in case of any negative financial situation. Thus, local governments will turn to ways of earning income. For this reason, applications that do not stretch the budget constraint but harden the budget constraint can prevent them from spending. It has been observed that studies in Turkey evaluate local governments mostly in terms of their financial autonomy. In this study, local governments are evaluated in the context of factors and tools that stretch the budget constraint and shape the expectations and behaviors of local governments. In this sense, it is thought that it will contribute to the academic literature. The aim of this study is to determine in which cases the central government will vouch for the obligations of local governments, why local governments are reluctant to create their own income, and the situations in which they expect financial and political recovery. As a method, foreign and domestic literature was searched. According to the findings of the study, a legal change should be made in order for the central government in Turkey to reduce transfers to local governments. Since local governments have limited savings on taxes, duties, fees and similar forced local income items, they cannot benefit from these resources effectively.

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