The Impacts of Sectoral Value Added to Economic Growth in Turkey

Abstract

The origins of economics are based on the balance between unlimited needs and scarce resources. This constraint has prompted economists to consider how to increase their production capacity and how much they will produce which good. In this historical process, it has become inevitable for economies to increase their production capacities and to realize structural transformations. At this point, the question arises in which sector the productivity and added value in production contribute more to economic growth. Agriculture is an important component of economic growth in developing countries and constitutes a large part of employment. Manufacturing has played a key role in rapid economic growth since the industrial revolution. On the other hand, with the liberalization period after 1980, it was understood that the share of manufacturing in production decreased and there was a tendency towards the services sector in developing countries. In this context, it is important to research the added values in agriculture, manufacturing, and services sectors and to reveal sectoral productivity. The aim of this paper is to research the impacts of agriculture, manufacture, and services value-added on economic growth in Turkey using econometric analysis methods. For this purpose, the relationship between variables was analyzed using regression and Granger causality methods for the period 1969-2019. According to the results of the regression analysis, it was seen that the value added that contributed the most to economic growth was the services sector with 0.47. Next, came manufacturing with 0.32 and finally the agricultural sector with a coefficient of 0.19. Granger causality test results showed that there is a mutual causality relationship between economic growth and manufacturing value added. In addition, it appeared that there is a one-sided causality from economic growth to agricultural value added. Analysis results reveal that the value added in the agriculture and manufacturing industry does not support sufficiently economic growth. In this context, it should be encouraged by policymakers to increase the added value in agriculture and manufacturing industry.