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Rebalancing Turkey’s growth by improving resource allocation and productivity in manufacturing

Author

Listed:
  • Aslihan Atabek

    (OECD)

  • Dan Andrews

    (OECD)

  • Rauf Gönenç

    (OECD)

Abstract

Turkey’s manufacturing sector has expanded considerably but not efficiently and competitively enough. This paper documents the drivers of its recent growth and diversification, and the factors that have held it back. It documents its segmentation and the outsized tail of poorly performing firms, which undermines aggregate productivity growth. Low productivity eases job creation in the short term, but undermines it in the long run and holds back improvements in living standards because of competitiveness losses. A core of well-performing firms (“frontier firms”) is not growing at full potential because of shortcomings in the policy framework. Intermediary (“follower”) firms sustain competition and deliver jobs, but tend to fall behind in productivity. Lower productivity units (“laggards”), which employ a large share of the low-skilled majority of the working age population, survive mostly thanks to the incomplete enforcement of rules and regulations. The resulting stalemate requires a coherent strategy of “systemic upgrading” of the business environment. This would enable all firms to operate in compliance with the law and on a level-playing field, under supportive regulations, taxation and innovation incentives. All firms could then achieve stronger productivity gains and the most promising firms could grow faster. At the same time, a credible flexicurity system needs to be put in place that facilitates adjustment in the labour market while protecting those affected by structural change. Rééquilibrer la croissance turque en améliorant l’allocation des ressources et la productivité Le secteur manufacturier s’est considérablement développé en Turquie, mais pas de manière suffisamment efficace et compétitive. Ce document décrit les moteurs de sa croissance récente et de sa diversification, et les facteurs qui ont freiné sa performance. Il met en évidence sa segmentation et le poids excessif des entreprises peu performantes, qui nuit à sa croissance et à sa productivité globale. Le ralentissement de la productivité accélère la création d'emplois à court terme, mais mine le niveau de vie à long terme en raison de pertes de compétitivité. Un noyau d'entreprises très performantes («entreprises frontières») ne se développe pas à plein potentiel, en raison de lacunes dans le cadre fourni par les politiques. Un groupe d’entreprises intermédiaires («entreprises suiveurs») soutiennent la concurrence et offrent des emplois, mais leur productivité ne croit pas vite. Des unités encore inférieures en productivité (les «entreprises retardataires») emploient une proportion importante de la majorité peu qualifiée de la population en âge de travailler, et survivent grâce à l'application incomplète des lois et des règlementations. Les blocages qui en résultent appellent une stratégie cohérente de «mise à niveau systémique» de l'environnement des affaires. Cela permettrait à toutes les entreprises d'opérer en conformité avec la loi et en une concurrence équitable, dans un cadre favorable de règles, de taxes et d’incitations à l’innovation. Toutes les entreprises pourraient alors réaliser des gains de productivité plus importants et les entreprises les plus prometteuses pourraient croître plus vite. En même temps, un système de flexicurité crédible doit être mis en place, pour faciliter les ajustements sur le marché du travail tout en protégeant les personnes touchées par les changements structurels.

Suggested Citation

  • Aslihan Atabek & Dan Andrews & Rauf Gönenç, 2017. "Rebalancing Turkey’s growth by improving resource allocation and productivity in manufacturing," OECD Economics Department Working Papers 1367, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1367-en
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    File URL: http://dx.doi.org/10.1787/c35af920-en
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    References listed on IDEAS

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    More about this item

    Keywords

    growth; informality; labour markets; productivity; structural change; taxation;

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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