The Political Economy of Regional Development: Local-Political Dynamics and Economic Growth

The potential determinants of regions growth performance must be examined for a balanced and sustainable regional development. For this purpose, this study includes investigating political determinants of growth such as municipality-government similarity estimated via the percentage of municipality same as government party, the percentage of aids from central government and the amount of incentives per 100 people as well as economic determinants such as physical and human capital accumulation and sectoral specialization. The findings of alternative fixed effects panel models based on 2007-2011 period and 26 regions (Nuts-2 regions) indicate that there is no systematic relationship between municipality- government similarities, central governments aids for municipality and regions growth performance in contrast to political propaganda. In addition, the amount of incentives per 100 people has positive effects on regions growth performance, but its negligible. It shows that incentive system, which has been changed three times since 2002isn t effective during the analyzed period. Economic findings of the models indicate that sectoral specialization, human capital accumulation, public investments in physical capital such as transport and communication and in human capital such as education and health services have positive effects in regions growth performances.