Abstract
This paper provides an extensive case study of the Turkish automotive and the consumer electronics industries. Despite a macroeconomic environment that inhibits investment and growth, both industries have achieved remarkable output and productivity growth since the early 1990s. Although there are similarities between the performances of the two industries, there are significant differences between their structures, links with domestic suppliers, technological orientation, and modes of integration with the global economy. The automobile industry is dominated by multinational companies, has a strong domestic supplier base, and has seized the opportunities opened up by the Customs Union by investing in new product and process technology and learning. The consumer electronics industry is dominated by a few, large, domestic firms, and has become competitive in the European market thanks to its geographical proximity, productive domestic labor, and focus on a protected and technologically mature segment of the market, which also helps explain the recent decline in industry's fortunes. These industries could have performed even better had more responsive macroeconomic policies been adopted. It is certain that governments could be more responsive only if far-reaching political/institutional reforms are undertaken by changing the constitution and current political party and election laws in order to establish public control over the political elites.
Highlights
Why do growth rates differ? This is one of the fundamental questions that have raised intense debate among economists, policy makers and ordinary citizens for decades if not centuries
There is no consensus among economists on explaining growth rate differentials across regions/nations/countries, recent theoretical and empirical studies emphasize the critical role of institutions, the macroeconomic environment and policies
The development of the Turkish economy since the early 1990s shows that despite the macroeconomic policies and conditions that inhibit investment and growth, it is possible that certain industries could perform very well, and play a very important role in generating employment and fostering growth
Summary
Why do growth rates differ? This is one of the fundamental questions that have raised intense debate among economists, policy makers and ordinary citizens for decades if not centuries. This paper aims to contribute to the extensive study of the World Bank Commission on Growth and Development by providing a case study of the automotive and the consumer electronics industries in Turkey. These industries are selected from Turkey because they have achieved a remarkable growth in output, productivity and exports in the last decade against all odds.
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