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Facts on Business Dynamism in Turkey

Author

Listed:
  • Ufuk Akcigit
  • Yusuf Emre Akgunduz
  • Seyit Mumin Cilasun
  • Elif Ozcan Tok
  • Fatih Yilmaz

Abstract

In this paper, we investigate various trends on competition and business dynamism in the Turkish manufacturing sector. More speci?cally, using micro level administrative data sets of ?rm balance sheets, credit registry and social security records, we focus on moments such as ?rm entry, exit, pro?tability, worker reallocation, labor share, labor productivity and credit distributions, among several others. Our results indicate that business dynamism in the Turkish manufacturing sector was relatively stable and even improving until 2012 but has been declining since then. We ?nd that market concentration and exit rates have started to rise, yet new business creation, labor share of output and economic activities of young ?rms have declined. Using a model with endogenous market competition, we show that an adverse shock to cost of R&D investment can explain these empirical trends. We identify increases in ?nancing costs after 2012 of followers as a potential mechanism for our ?ndings in Turkey. We next perform a policy analysis with our model which suggests that providing support (e.g., R&D subsidy) to immediate followers can undo the adverse effects of the negative shock to ?nancing costs and therefore foster competition and faster growth.

Suggested Citation

  • Ufuk Akcigit & Yusuf Emre Akgunduz & Seyit Mumin Cilasun & Elif Ozcan Tok & Fatih Yilmaz, 2019. "Facts on Business Dynamism in Turkey," Working Papers 1930, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  • Handle: RePEc:tcb:wpaper:1930
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    File URL: http://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2019/19-30
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    Keywords

    Business dynamism; Market concentration; Competition; Turkish economy;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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