Determinants of Labor Productivity of Turkish Manufacturing Sectors: The Role of Global Value Chain Participation

Abstract

Purpose: This paper investigates the determinants of labor productivity of Turkish manufacturing sectors by taking into account both the global value chain (GVC) participation and the research and development (R&D) expenditure for the period of 1995-2018. Methodology: To analyze the determinants of labor productivity in Turkish manufacturing sectors, we specify the labor productivity model and estimate this empirical model by the Ordinary Least Squares (OLS) and Two-Stage Least Squares (2SLS) methods. Findings: Our estimation results indicate that while simple forward GVC participation enhances the labor productivity of Turkish high-tech manufacturing sectors if they trade with developing countries, complex forward GVC participation increases productivity regardless of trading partners. For low-tech sectors, there is no significant impact of GVCs or R&D on productivity. There is no significant impact of backward GVC participation and sectoral R&D intensity on labor productivity. These significant results provide strong evidence for the importance of deeper involvement of high-tech sectors in GVCs for higher sectoral productivity. Given the strong heterogeneity in terms of sectors and trading partners, specific policies should be targeted to benefit from the productivity gains of the global value chains. Originality: This study contributes to the current studies by focusing on disaggregated measures of GVC participation indices and enlarges the empirical analysis by considering the heterogeneity in trading partners (developed and developing trading partners).