1. Introduction
From 1923 when the Republic was declared up to date, different foreign trade policies such as liberal or protectionist have been applied in Turkey according to the necessities of the period. Implementation of export-oriented growth policy with the 24 January 1980 Decisions was a milestone in Turkey. Export promotion policies in this period have largely been aimed at increasing exports of the manufacturing sector. While the sector which had the largest share in total exports in 1980 was the agricultural sector, the share of the manufacturing sector has started to increase since 1981. Over the analysis period (2000–2015), manufacturing, mining and quarrying, agriculture and forestry, wholesale and retail trade sectors have the highest export values as a share of total exports. On the other hand, sectors of real estate, renting and business activities and other community, social and personal service activities have the lowest shares. Sustainable economic growth is seen as a growth based on net export within the current global and local conditions in Turkey. Accordingly, “rebalancing in the economy” policies have been implemented in the Turkish economy since 2012 in order to ensure growth based on net export (
TEA 2016, p. 30). In this context, a number of empirical studies addressing the sample of Turkey have been conducted in order to assess whether the export-based growth strategy has achieved its goal since 1980. When these studies are examined, it is seen that a large part of the work is at the macro level while the number of studies dealing with the relationship at the micro (sectoral) level is rather limited. Macro-scale studies commonly measure the aggregated impact; the differentiated impact of each sector with different export volumes cannot be measured. Therefore, the problem of aggregation bias may arise, in which the findings might be inconsistent.
Given the aforementioned motivation
1, the aim of this study is to examine the impact of sectoral exports on economic growth in Turkey over the period 2000:Q1–2015:Q4 within the panel data framework. For this purpose, two hypotheses have been proposed accordingly. The first one is that “exports will affect growth in the micro-base as well as in the macro-base”. As these effects may change with respect to the export and production potential of the concerned sector, the second hypothesis is that “sectors that increase export volume more will contribute to economic growth more”. To test these hypotheses, the impact of eight different sectors’ export volumes on economic growth is analyzed using quarterly data covering the period 2000–2015 by employing panel time series estimator.
The rest of the study is structured as follows:
Section 2 reviews relevant literature,
Section 3 describes model and data,
Section 4 presents methods and results, and
Section 5 concludes.
2. Literature Survey
As stated in the introduction section, most of the studies focus on the nexus between export and economic growth at the aggregate level. In addition to the regression approach, on the other hand, causality approaches are used in most of the macro level studies as well.
Table 1 summarizes these studies.
Unlike the studies at the aggregated level, studies at the disaggregate level are relatively limited.
Table 2 reviews sectoral level studies based on the causality approach.
In the case of Turkey there are a limited number of studies using disaggregated data. In addition, the scope of the sectors discussed by the aforementioned literature is very scarce. Sectoral relationships on the export-led growth hypothesis in the case of Turkey are mostly investigated through causality approaches.
Table 3 reviews sectoral level studies in the case of Turkey.
While studies are investigated in export-growth literature employing sectoral export data, two deficiencies are remarked: (i) the sectors covered by the sectoral studies are rather narrow in terms of sectors (ii) most of the sectoral studies use causality approaches
2. This situation is still valid in studies conducted for Turkey. In this context, the main motivation of this study is to test the validity of the export led growth hypothesis using sectoral data for Turkey using panel regression approaches. To the best of our knowledge, this is the first study which investigates export-growth nexus with comprehensive sectoral data for Turkey employing this method.
3. Model and Data
In Equation (1), the growth, the capital and the labor are taken in aggregate forms
3. The export consists of eight different sectors namely (i) agriculture and forestry; (ii) fishing; (iii) mining and quarrying; (iv) manufacturing industry; (v) electricity, gas and water supply; (vi) wholesale and retail trade; (vii) real estate, renting and business activities and (viii) other social and personal services. Function in Equation (1) can be written in panel data format as the following:
where
i and
t represents sectors (
i = 1, …, 8) and time period (t = 2000:Q
1, …, 2015:Q
4), respectively. In addition,
v and є represents sector-specific variable and random error term, respectively.
To examine the effect of sectoral export on economic growth, we focus on the 2000:Q1–2015:Q4 period. Growth variable is represented using GDP by expenditure approach at 1998 fixed prices. Gross fixed capital formation is used as fixed capital at 1998 fixed prices according to the expenditure method. The labor variable is measured as the number of workers over the age of 15. Export variable comprises of sectoral export data according to ISIC. 3. All data in the model were obtained from the Turkish Statistical Agency database (
http://www.tuik.gov.tr/UstMenu.do?metod=temelist). In addition, all variables are modeled as natural logarithms. This transformation ensures that the coefficients obtained after parameter estimation can be interpreted as elasticities.
5. Concluding Remarks
In this study, export-led growth hypothesis is analyzed at the micro-scale in Turkey. Two hypotheses have been proposed in this framework. The first is “exports will affect growth in the micro-base as well as in the macro-base”. As these effects may change with respect to the export and production potential of the relevant sector, the second hypothesis is “sectors that increase export volume more will contribute to economic growth more”. To test these hypotheses, the impact of eight different sectors’ export volumes on economic growth is analyzed using quarterly data covering the period 2000–2015 by employing the MG estimator.
Findings provide some useful information in terms of policy implications. Export incentive policies will contribute positively to economic growth. Although the largest share in the sectoral composition of exports belongs to the manufacturing industry, increases in export level in the agriculture and forestry, and mining and quarrying sectors enhance economic growth more than the manufacturing industry. Therefore, export promotion policies in the agriculture and mining sectors will have a larger effect on the growth than the effect created by the manufacturing industry. This finding is consistent with
Khalafalla and Webb (
2001), which has resulted in the primary export of goods having a greater impact on growth than manufacturing industry exports in Malaysia, which is a developing country like Turkey. This can be explained by the fact that the agriculture and mining sectors are the two main sectors that provide raw materials to the manufacturing industry. Therefore, the increase in production in these two sectors will contribute to the manufacturing industry, whose production is largely based on imported raw materials, due to the inadequacy of domestic resources. Import of energy is in the first place among imported raw materials. In particular, the incentives to evaluate the current potential of the mining and quarrying sector will increase mining production, especially energy production. Therefore, imports of intermediate goods in manufacturing industry will decrease.
Except for exports, the coefficients of the estimated control variables also provide some important data. For all sectors, the estimated coefficient on the labor variable is greater than that of capital variable. This finding reveals that the increases in labor input increase economic growth more than the increases in capital input. This finding is also confirmed for all sectors. This result is quite consistent with
Alam (
2003) and
Cuerasma and Wörz (
2005), in which the validity of Neo-classical origin-export led growth hypothesis is analyzed in Mexico and 45 developed and developing countries, respectively. Although the impact of labor on growth in Turkey is greater than the effect of capital on growth, technology (capital) intensive policies should be implemented rather than labor intensive policies. In this context, technology-intensive production with a higher added value will lead to a higher growth rate. In addition, findings from the MG estimator show that growth elasticity of labor is elastic in the electricity, gas and water supply sector. Further increases in the input of labor lead to an additional increase in the production level of this sector. This finding can be explained by the need for a large infrastructure in terms of distribution and storage activities of the electricity, gas and water sector. Infrastructure necessity of the sector is directly related to the construction sector which is labor intensive.
The findings indicate that growth contribution of the exports in real estate, renting and business activities sector and other community, social and personal service activities sector is very low. In fact, the impact of exports on growth in these sectors is generally statistically insignificant. The relative insignificance of both sectors in the sectoral export composition is likely to explain the finding.
Micro findings are consistent with
Abu-Quarn and Abu-Bader (
2004),
Kurt and Terzi (
2007), and
Yaprakli (
2007) who conclude that the export-led growth hypothesis is found to be valid in the manufacturing sector of Turkey. Moreover, in the manufacturing industry findings are consistent with
Parida and Sahoo (
2007),
Ghatak et al. (
1997),
Herzer et al. (
2006),
Cuerasma and Wörz (
2005),
Cipamba (
2012),
Shakouri and Yazdi (
2012), and
Shafiullah et al. (
2017) in the case of countries other than Turkey. In the case of the fishery sector, findings of this study have results consistent with those by
Duc and Tram (
2011) in Vietnam. In the case of the agriculture sector, findings are consistent with
Hennebery and Khan (
2000), who report validity of export led growth hypothesis in Pakistan,
Uddin (
2015), who confirm the export led growth hypothesis in Bangladesh, and
Shafiullah et al. (
2017), who examine Australia. In the case of the mining sector, results match
Ciftcioglu and Nekhili (
2005) who support validity export led growth hypothesis in Turkey,
Cipamba (
2012). who investigates South Africa,
Shakouri and Yazdi (
2012), who confirms validity of export led growth hypothesis in Iran, and
Shafiullah et al. (
2017), who validate validity of export led growth hypothesis in Australia.
Finally, empirical findings can be evaluated in terms of the aforementioned hypotheses. The findings verify the hypothesis that “exports will affect growth in micro-base as well as macro-base”. The hypothesis that “sectors that increase export volume more will contribute to economic growth more” is also confirmed to be in line with the empirical results.
In this study, Dumitrescu and Hurlin’s causality test is also employed. Test results indicate the validity of the export-led growth hypothesis for (i) agriculture and forestry; (ii) fishery; (iii) electricity, gas and water supply sectors and (iv) other community, social and personal service activities whereas growth-led export hypothesis is valid in the case of mining and quarrying. In addition, causality findings support the feedback hypothesis in (i) manufacturing; (ii) wholesale and retail trade; and (iii) real estate, renting and business activities sectors. The results based on different lag lengths show that causal hypotheses are sensitive to the lag specifications. Given these findings, this study underlines the importance of lag specification in determining the causality between exports and growth.
In the case of Turkey, the findings of the causality test are consistent with
Akbulut and Terzi (
2013) and
Onder and Hatirli (
2014) who confirm a bidirectional relationship between export and growth in the manufacturing industry.
Although the main motivation of the study depends on the estimation of the slope coefficients through the panel regression approach, we also employ causality for robustness purpose. Once the results obtained from two procedures are compared, the majority of the sectors produce consistent results. In the case of some sectors, however, this study reveals that findings might be volatile across the empirical approach.
It is possible to make some suggestions for the researchers who will work on similar issues in the future. First, this study analyzes the effects of sectoral exports on growth using a Neoclassical production function. Upcoming studies could analyze the effect of exports on growth by using internal growth models. Second, the analysis period can be divided into two sub-periods in order to see the impact of the 2008 financial crisis.