Abstract:

Studies examining the structure of the public sector have accelerated in the literature, especially since the 1960s, with the standpoint known as Public Choice Theory. Within the scope of Public Choice Theory, which examines public sector behaviors with economic tools, the fiscal illusion, which is one of the concepts that explains the failure of the government, deals with the growth of the public sector, especially focusing on the relationship between public expenditures and the tax system. The study, which includes the theoretical elements and the effect of the public sector on the decision-making processes in addition to the historical development, is empirically examined the fiscal illusion in Turkey within the scope of causality relations and differs from previous studies in the literature in this respect. The study, in which the expenditure and tax revenue data for the period 1960-2020 and the Granger causality test are used, original side of the study both in terms of the breadth of the period and the method. In the study, the fiscal illusion was examined through the causality relationship between public expenditures and tax revenues amounts for a wide period in Turkey, and in this respect, it was the first study in Turkey. According to the result of the Granger causality analysis, no causal relationship is detected between public expenditures and tax revenues. Therefore, no link is found between tax payments and public expenditures in Turkey in the mentioned periods.

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