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Escape from the Middle Income Trap: Which Turkey?

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... He attributes emission growth in the household and agriculture sectors to energy intensity. Comparing the leading growth engines of the Turkish economy for the periods 1995-2002-2009, Aşıcı (2015 also illustrates that the latter period is characterized by growth in more energy intensive sectors and "the composition of the economic activity is concentrated in more CO2 and NOx intensive sectors" (Aşıcı, 2015(Aşıcı, : 1738. ...
... He attributes emission growth in the household and agriculture sectors to energy intensity. Comparing the leading growth engines of the Turkish economy for the periods 1995-2002-2009, Aşıcı (2015 also illustrates that the latter period is characterized by growth in more energy intensive sectors and "the composition of the economic activity is concentrated in more CO2 and NOx intensive sectors" (Aşıcı, 2015(Aşıcı, : 1738. ...
Turkey is known to suffer from severe volatility in its growth patterns, as well as from the uneven sectoral growth and employment. Volatile rates of emissions across sectors are further manifestations of this uneven structure. The purpose of this study is two-fold: first, we check for dynamic patterns of convergence of carbon dioxide (CO2) emissions across sectors; and second, using evidence from panel data econometrics, we search for the determinants of these processes utilizing macroeconomic explanatory variables. We find that, based on various alternate criteria, CO2 emissions display conditional convergence mainly driven by the business cycle. Furthermore, across sectors, high technology activities display convergence over time; and yet, medium technology sectors that constitute the bulk of the aggregate value added display either poorly convergent or divergent trends. These results reveal that much of the emissions convergence is driven by the business cycle rather than the workings of discretionary mitigation policy.
Chapter
In this study, we investigate the macroeconomic effects of two complementary policy environments to invigorate growth, employment, and income equality across two broadly differentiated regions in Turkey: poor and high/mid-income. With the aid of a regional computable general equilibrium model that disaggregate the production structure into 13 sectoral activities and two geographical regions, we first study the long run dynamic effects of a regional production and investment subsidization program. Second, we supplement this environment by a productivity enhancement program in the poor region. Our results reveal that regionally differentiated productivity enhancing measures coupled with a subsidized investment program to facilitate capital accumulation and reduce the outflow of factors out of the poor region are of utmost importance in designing a sustained growth path to pull the aggregate economy from the dual traps of middle income and of poverty.
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The objective of this paper is to provide an impact analysis of the macroeconomic consequences of the employment subsidization programs in Turkey implemented under the post-2008 crisis period. To this end, an applied general equilibrium model (of the computable general equilibrium – CGE variety) is utilized to investigate the production, incomes generation, and aggregate demand components of the domestic economy. The analysis highlights the rather limited returns to the subsidization package, and argues that much of this was due to the dis-equilibriating and fragile macroeconomic environment under the neoliberal policy framework. The massive drop of domestic savings; a severe mis-alignment in the real exchange rate causing significant appreciation of the domestic currency; rise of the external deficit and of foreign indebtedness along with a severe fall in the total productivity effort were different facets of this poor macroeconomic performance. Thus, an important message of the study is that, had the macroeconomic balances were maintained at their historical averages, and a more competitive exchange rate could have been pursued, as much as threefolds of a gain in aggregate employment could have been generated with the same intensity of the employment subsidization package, in comparison to the historically realized levels.
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We analytically investigate and assess the interactions between knowledge-driven growth, acquisition of human capital, and the role of strategic public policy for the Turkish economy within the context of a general equilibrium model. The model aims to investigate the public policies toward fostering the development of human capital (such as investments in education and learning) and those at enhancing total factor productivity through investments in physical capital and innovation (such as subsidies to R&D), and to study the impact of various public policies on patterns of growth, along with their likely consequences from the points of view of capital accumulation, income distribution, social welfare and economic efficiency for the Turkish economy. With the aid of the model, we seek for analytical answers to the following question: for a government constrained with its budgetary requirements, which type of public subsidiziation policies is more conducive for enhancing growth and social welfare: promotion of human capital formation through subsidies to education expenditures, or promotion of new R&D formation through subsidies to R&D investment expenditures? According to the model findings, a single-handed strategy of only subsidizing education expenditures to promote human capital formation falls short of achieving desirable growth performance in the medium to long run. Under the policy of human capital formation promotion, expected growth and welfare results are weak in the medium-to-long run unless increased human capital can upgrade the number of research personnel employed in the R&D development sector. Under these observations, it can be argued that the public policy should be directed to R&D promotion in the medium-to-long run to complement an education promotion program to sustain human capital formation.
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Competitiveness of metropolises is one of the important factors also determining competitiveness of national economies. Enhancing the competitiveness of Turkish metropolises is a crucial factor for sustainable development due to the increasing competitive environment in the global world. Increasing international trade accelerates the integration process of metropolises to the global markets and brings them into the competitive position with the other parts of the world. Leading world metropolises are not only trade and finance centers but direct the development with their high level of technological production. In this respect, it is very important to consider different aspects of regional competitiveness. The study aims at explaining basic elements of regional competitiveness; transportation and communication infrastructure, innovation, sectoral production structure, quality of urban life, human capital, institutional capacity and network relations on a theoretical basis.
Thesis
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US-centered Subprime Crisis has equally affected both developed and developing economies of the world. Consequently Turkey‟s phenomenal growth experience through seven years came to a halt. By the third quarter of year 2008, this crisis manifested itself destructively by lowering industrial production, crippling the domestic demand, and creating the highest recorded level of unemployment rate. According to IMF projections, Turkey would face a negative growth in 2009. In this lieu, the objective of this thesis is to study and analyze Turkey‟s financial and real sector‟s vulnerability from a technological point of view with the crisis background. The study uses two econometrical models. We measured Turkey‟s Financial vulnerability using the country‟s net worth position, capital flows, exchange rate and foreign exchange reserve change, and by testing whether credit boom exists. To follow, a credit crunch test is performed and finally, an econometrical based Disequilibrium Model is applied creating Turkey‟s credit supply and demand functions. To analyze the real sector, a Vector Auto regression Model is developed and applied on Turkey‟s export and import data taking into account OECD‟s technology level classification. Thus, Turkey‟s industrial technology phase is identified. These steps are crucial towards formulating a medium and long holistic industrial policy for the country. The Structural Path Analysis that creates structural path among economic accounts giving global, direct and total influence multipliers has been applied to Turkey‟s 9-Sector Social Accounting Model for 2006. This contributes to the industrial policy making process. The fourth chapter analyzes as to which policy tool can be effective in overcoming the negative impacts of global crisis, based on a Computable General Equilibrium (CGE) Model. This creates five policy shocks to the model. The Last chapter includes Policy Recommendations based on CGE shock results and a conclusion covering the general findings and limitations of the study.
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This paper discusses the causes of the middle-income trap in Latin America and the Caribbean, identifies the challenges and opportunities for Latin America that come from China's rise, and draws lessons from New Structural Economics and the Growth Identification and Facilitation Framework to help Latin America escape the middle-income trap. Countries in Latin America and the Caribbean are caught in a middle-income trap due to their inability to structurally upgrade from low value-added to high value-added products. Governments in Latin America and the Caribbean should intervene in industries in which they have a comparative advantage, calibrating supporting policies in close collaboration with the private sector through public-private sector alliances. Through continuous structural upgrading in sectors intensive in factors such as natural resources, scientific knowledge, and unskilled labor, the region could achieve dynamic growth. This would require investments in education, research and development, and physical infrastructure. Therefore, industrial upgrading and diversification would be essential to avoid further de-industrialization arising from the competitive pressures of the rise of China, broaden the base for economic growth, and create the basis for further sustained reduction in unemployment, poverty and income inequality. Failure to do so would lead to a loss of competitiveness and risks of further de-industrialization.
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Technological changes bring about economic growth. We are now at the beginning of the new phase of global economic development called new economy. The bearers of it are especially information technologies, biotechnology, material, energetic and cosmic technologies. There is reflected the influence of important integration factors as new technologies, high competitiveness (which becomes a necessity), new economic culture in the sphere of government, households and business.
Chapter
European economic growth, which accelerated in the second half of the eighteenth century, was accompanied by an expansion in the supply of transportation. Demand for transport services increased when industrialists and farmers purchased their inputs from a resource base which widened in space and as they sold a growing proportion of their output on markets at an ever greater distance from their enterprises. As commodity output went up, the share marketed increased even more rapidly because improvements in transport made it possible to sell further afield and because specialisation (a major impetus to economic growth between 1789 and 1914) led to more trade between firms, farms and industries. In the traditional economy of early modern Europe production tended to occur within integrated forms of enterprise geographically concentrated in well defined regions. But over the nineteenth century the co-ordination of production came to be achieved through organised commodity and input markets serviced by extended and increasingly efficient transport and distribution networks.
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Turkey entered the 1990s under conditions of a truly “open economy”–a macroeconomic environment where its capital account was completely liberalized and the process of financial de-regulation was completed. In this setting, many of the instruments of macro and fiscal control have changed in nature, as the constraints of macro equilibrium have undergone major structural change. In the early 1990s, the domestic economy witnessed a massive inflow of (mostly short-term) foreign capital. Furthermore, the so-called foreign exchange gap which had constrained the growth potential of Turkey for more than three decades seemed to have been alleviated. The ready availability of foreign exchange enabled the Turkish Lira to appreciate against the major currencies in real terms and led to a rapid expansion of import demand. Moreover, it made possible the financing of both the rapidly growing fiscal deficit of the public sector and the sudden rise of wage costs in the labor market.