Production Technology Dynamics of Manufacturing Industries in Turkey

Abstract

This study analyzes the firm level productivity to clarify the differences among manufacturing sectors. We provide estimates of regional and sectoral total factor productivity (TFP) using firm-level data on Turkish manufacturing industry provided by TURKSTAT as survey data over the 2003-2015 period to understand firm heterogeneity across sectors and regions. Based on the results obtained from different estimation methods as ordinary least square, fixed effect and Levinshon-Petrin TFP estimations, there is a significant heterogeneity across sectors and firms in the same sector in the micro-level and this results in different average TFP levels for regions at macro-level. Our findings suggest that discrepancies in regional TFP levels are determined by technological dynamics of the industries that are dense in those regions. Calculating sectoral TFP differences may guide policymaker not only to give incentives to most productive sectors in order to accomplish sustainable growth with high value-added production, but also differentiating between firms and regions while giving incentives according to the density of the sectors on those regions.

Keywords

• Turkish manufacturing industry
• Firm-level Data
• TFP

References

1. Acemoglu, Daron, Simon Johnson and James A. Robinson. 2002. “Reversal of Fortune: Geography And Institutions In The Making Of The Modern World Income Distribution.” The Quarterly Journal of Economics 117(4): 1231-1294.
2. Ackerberg, Daniel, Kevin Caves and Garth Frazer. 2006. Structural identification of production functions. MPRA Paper 38349 University Library of Munich, Germany.
3. Arnold, Jens Metthias. 2005. “Productivity estimation at the plant level: A practical guide.” Unpublished manuscript 27.
4. Atiyas, Izak and Ozan Bakis. 2014. “Aggregate and Sectoral TFP Growth in Turkey: A Growth Accounting Exercise.” Iktisat Isletme ve Finans 29(341):09–36.
5. Barro, Robert J. and Xavier Sala i Martin. 1991. “Convergence across States and Regions.” Brookings Papers on Economic Activity 22(1):107–182.
6. Blanchard, Olivier Jean and Lawrence F. Katz. 1992. “Regional Evolutions.” Brookings Papers on Economic Activity 23(1):1–76.
7. Blundell, Richard and Stephen Bond. 2000. “GMM Estimation with persistent panel data: an application to production functions.” Econometric Reviews 19(3):321–340.
8. Caselli, Francesco. 2004. Accounting for Cross-Country Income Differences. CEPR Discussion Papers 4703 C.E.P.R. Discussion Papers.

9. Conesa, Juan Carlos, Timothy J. Kehoe and Kim J. Ruhl. 2007. “Modeling great depressions: the depression in Finland in the 1990s.” Quarterly Review (Nov):16–44.
10. Filiztekin, Alpay. 2000. “Openness and productivity growth in Turkish manufacturing.” Yale University (Australia)
11. Filiztekin, Alpay and Murat Alp çelik. 2010. “Tu¨rkiyede b¨olgesel gelir e¸sitsizli˘gi (Regional income inequality in Turkey).” Megaron 5(3):116–127. 27
12. Gennaioli, Nicola, Rafael La Porta, Florencio Lopez De Silanes and Andrei Shleifer. 2014. “Growth in regions.” Journal of Economic Growth 19(3):259–309.
13. Grossman, Gene M and Elhanan Helpman. 1991. “Trade, knowledge spillovers, and growth.” European Economic Review 35(2):517–526.
14. Hall, Robert E. and Charles I. Jones. 1999. “Why Do Some Countries Produce So Much More Output Per Worker Than Others?” The Quarterly Journal of Economics 114(1):83–116.
15. Hoch, Irving. 1962. “Estimation of production function parameters combining time-series and cross-section data.” Econometrica: journal of the Econometric Society pp. 34–53.
16. Jones, Charles I. 2011. Misallocation, Economic Growth, and Input-Output Economics. NBER Working Papers 16742 National Bureau of Economic Research, Inc.
17. Krugman, Paul. 1991. “Increasing Returns and Economic Geography.” Journal of Political Economy 99(3):483–99.
18. Levinsohn, James and Amil Petrin. 2003. “Estimating production functions using inputs to control for unobservables.” The Review of Economic Studies 70(2):317–341.
19. Lucas, Robert E. 1988. “On the mechanics of economic development.” Journal of monetary economics 22(1):3–42.
20. Melitz, Marc J. 2003. “The impact of trade on intra-industry reallocations and aggregate industry productivity.” Econometrica 71(6):1695–1725.
21. Mundlak, Yair. 1961. “Empirical production function free of management bias.” Journal of Farm Economics 43(1): 44–56.
22. Olley, Steven and Ariel Pakes. 1996. “The Dynamics of Productivity in the Telecommunications.” Econometrica 64(6):263–97.
23. Ottaviano, Gianmarco I. P. and Diego Puga. 1998. “Agglomeration in the Global Economy: A Survey of the ’New Economic Geography’.” The World Economy 21(6):707–731.
24. Petrin, Amil, Brian P Poi and James Levinsohn. 2004. “Production function estimation in Stata using inputs to control for unobservables.” Stata journal 4:113–123.
25. Prescott, Edward C. 1998. “Needed: A Theory of Total Factor Productivity.” International Economic Review 39(3):525–51. 28
26. Restuccia, Diego and Richard Rogerson. 2008. “Policy distortions and aggregate productivity with heterogeneous establishments.” Review of Economic Dynamics 11(4):707–720.
27. Restuccia, Diego and Richard Rogerson. 2013. “Misallocation and productivity.” Review of Economic Dynamics 16(1):1–10.
28. Sala-i Martin, Xavier X. 1996. “Regional cohesion: Evidence and theories of regional growth and convergence.” European Economic Review 40(6):1325–1352.
29. Saygılı, Seref, Cengiz Cihan, Cihan Yal¸cın and T¨urknur Hamsici Brand. 2014. “Tükiye İmalat Sanayinde İthal Girdi Kullanımındaki Artışın Kaynakları.” İktisat İsletme ve Finans 29(342):09–44.
30. Sivadasan, Jagadeesh. 2006. “Productivity Consequences of Product Market Liberalization: Micro-evidence from Indian Manufacturing Sector Reforms.”.
31. Solow, Robert M. 1957. “Technical Change and the Aggregate Production Function.” The Review of Economics and Statistics 39(3):pp. 312–320.
32. Taymaz, Erol, Ebru Voyvoda and Kamil Yılmaz. 2008. Türkiye İmalat Sanayiinde Yapısal Dönüşüm ve Teknolojik Değişme Dinamikleri. ERC Working
33. Papers 0804 ERC - Economic Research Center, Middle East Technical University.
34. Van Beveren, Ilke. 2012. “Total factor productivity estimation: A practical review.” Journal of Economic Surveys 26(1):98–128.
35. Wooldridge, Jeffrey M. 2009. “On estimating firm-level production functions using proxy variables to control for unobservables.” Economics Letters 104(3):112–114.