Regional economic growth in Turkey: the effects of physical, social and financial infrastructure investment

Abstract

This paper explores the roles different categories of infrastructure investment play in promoting economic growth across regions in Turkey. There are two different approaches, namely partial least squares structural equation modeling and standard errors corrected for heteroskedastic using panels to compute regional physical, social and financial infrastructural indices and their impacts on income. Overall, the results reveal that differences in infrastructural endowments across Turkish regions explain a significant portion of regional disparity in per capita income. While financial infrastructure has a positive direct effect only, physical and social infrastructures contribute both directly and indirectly. We suggest that policy makers focus primarily on investing in physical infrastructure in order to mitigate the regional income disparity. Secondly, improving education, health and housing facilities as well as financial activities would contribute further diminishing income disparity across regions.