A consideration of the environmental externality of Turkey's integration into global value chains: evidence from dynamic ARDL simulation model.

Abstract

The phenomenal growth experienced by Turkey at the turn of the millennium is attributed in part to increased participation in global value chains. While participation in global value chains has been beneficial to the Turkish economy, it also poses unique environmental challenges. Consequently, this study focuses on shedding some light on the environmental externality of Turkey's participation in global value chains. This article examines the environmental effects of Turkey's participation in global value chains for the period 1990-2018, using a dynamic ARDL analysis. The study further compares the environmental effects of Turkey's backward and forward linkages into global value chains, so as to determine which contributes more to carbon emissions. The cointegration test results and dynamic ARDL simulations confirm the existence of a long-run relationship between the environment and global value chain participation. All measures of global value chain participation display a positive long-run impact on carbon emissions. The results also show that the polluting effect of backward and forward linkages into global value chains is not too different. The study finding suggests that Turkey is being assigned segments of the value chain that require dirtier production processes through incentives from global trade integration, thus making Turkey a pollution haven. It is concluded that this is because other countries continually source for inputs requiring dirty production processes from Turkey, as Turkey also exports final goods that are produced using eco-unfriendly techniques. Policymakers in Turkey therefore need to follow more environmentalist policies in the process of global value chain participation.