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Micro- and Macroeconomic Impacts of a Place-Based Industrial Policy

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Listed:
  • Enghin Atalay
  • Ali Hortaçsu
  • Mustafa Runyun
  • Chad Syverson
  • Mehmet Fatih Ulu

Abstract

We investigate the impact of a set of place-based subsidies introduced in Turkey in 2012. Using firm-level balance-sheet data along with data on the domestic production network, we first assess the policy’s direct and indirect impacts. We find an increase in economic activity in industry-province pairs that were the focus of the subsidy program, and positive spillovers to the suppliers and customers of subsidized firms. With the aid of a dynamic multi-region, multi-industry general equilibrium model, we then assess the program’s impacts. Based on the calibrated model we find that, in the long run, the subsidy program is modestly successful in reducing inequality between the relatively under-developed and more prosperous portions of the country. These modest longer-term effects are due to the ability of households to migrate in response to the subsidy program and to input-output linkages that traverse subsidy regions within Turkey.

Suggested Citation

  • Enghin Atalay & Ali Hortaçsu & Mustafa Runyun & Chad Syverson & Mehmet Fatih Ulu, 2023. "Micro- and Macroeconomic Impacts of a Place-Based Industrial Policy," NBER Working Papers 31293, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:31293
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    More about this item

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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