The effects of public capital on private sector performance in Turkish regional manufacturing industries1

A previous version of this study was presented at the Reinventing Regions in the Global Economy, Regional Studies Association, 12–15 April 2003, Pisa, Italy.

Abstract

This article investigates the impact of public capital formation on private manufacturing sector performance in the seven geographical regions of Turkey and in aggregate. A vector autoregression (VAR) model has been employed to estimate long run accumulated elasticities of private sector variables with respect to public capital for the time period 1980–2000. The results show that public capital affects private output positively in aggregate and in all regions apart from the Black Sea and Mediterranean regions. The results also reveal that only in the Marmara region, the impact is positive both on input and output. The public capital crowds in private sector inputs in some regions.

Notes

A previous version of this study was presented at the Reinventing Regions in the Global Economy, Regional Studies Association, 12–15 April 2003, Pisa, Italy.

See section 3 for the details.

In this context the EU committed in credits total of ECU 557 million and as grants a total of ECU 393 million in the framework of custom union (1996–1999). Under regulations concerning pre‐accession financial assistance, EU is planning to grant a total of € 889 million under MEDA II and provide € 1470 billion as European Investment Bank credit (http://www.mfa.gov.tr).

See State Planning Organization (SPO), Main Economic Indicators (http://www.dpt.gov.tr).

The definition by Turkey of a provisional map for regional purposes according to NUTS classification criteria has been completed and approved by EUROSTAT. The geographical regions of Turkey can be classified as NUTS 1 accordingly.

All important decisions about the allocation of public funds and the provision of the regional infrastructure have been made centrally by the national government in Ankara.

Taymaz and Saatçi (1997) also used it as a proxy for capital.

See, for example, Önder et al. (2003) for more details on the method.

The perpetual inventory method could not be applied to calculate the private sector manufacturing capital, due to unavailability of the data to obtain initial capital stock.

Pereira and Flores (1999) used the same methodology.

The results related to unit root tests and VAR estimates are available upon request.

This assumption is used in many studies on this topic (see, for example, Pereira & Flores, 1999; Voss, 2002).

The Mediterranean region is the most popular tourism area among the seven regions in Turkey.