The Impact of Public Capital on the Efficiency of Private Manufacturing Industry at the Regional Level

Year 2010, Volume: 10 Issue: 4, 1167 - 1174, 01.11.2010

Metin Karadağ

Abstract

The public capital installed in a region has an important role in the development of that region, because the studies in this area show us that public capital has an important role on the private sector performance. It is expected that public capital enhances private sector efficiency, and thus the output of that sector. As it is well known regional disparities still exist in Turkey. The research in this area shows that public capital can be used to reduce regional disparities. In this respect the main aim of this study is to investigate the impact of public capital formation on the efficiency of private manufacturing industries in Turkey at NUTS II level. While most of the studies in this area use public capital as a direct input for production, we assume that public capital has an effect on private output by enhancing technical efficiency. For the aim of the study, we employ data envelopment analysis to calculate efficiency scores by using a panel data of 25 regions at the first stage; afterwards we estimate the effects of public capital on private sector efficiency econometrically by using these scores. The results reveal that public capital has positive impact on private sector efficiency both at the regional level and regional level

Keywords

Public capital, technical efficiency, data envelopment analysis, Turkish manufacturing industry, regional development

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