Structural Change and Growth Prospects in the Turkish Manufacturing Industry

Abstract

The growth and development literature emphasize two sources of labor productivity growth. First, productivity improvements triggered by physical and human capital accumulation and technological change and second, productivity improvements arising from movements of resources towards high productivity industries, that is structural change. The effect of structural change may be productivity enhancing or may bring a drag on aggregate productivity. Empirical studies highlight growth enhancing structural change for newly industrialized Asian countries while indicates weak or growth reducing structural change for some Latin American and African countries. Moreover, these studies also highlight the importance of movements of resources within the manufacturing sub industries. The process of structural change and economic development of developed countries is well documented but studies about less developed or developing countries is very weak. In this respect this study aims to examine whether the Turkish economy fits into this picture of growth-enhancing or reducing structural change? The conventional shift-share analysis is used in order to analyze the effect of structural change on the productivity of the manufacturing industry and the whole Turkish economy for the period of (2003-2017). The results suggest that on average, the within growth effect dominates labor productivity improvements whereas between growth and covariance effects account for very small parts of productivity growth for all the periods.