Regional Specialization and Industrial Concentration Patterns in the Turkish Manufacturing Industry: An Assessment for the 1980–2000 Period1

1. An earlier version of this paper was presented at the International Conference of Regional Studies Association in Leuven, Belgium, 8–9 June 2006.

Abstract

Previous studies on geographical distribution of economic activity in Turkey demonstrate that firms are localized in major metropolitan areas as well as a set of emerging regions. The aim of the paper is to complement the findings of the studies on regional and industrial concentration in Turkey's manufacturing industry by exploring whether regional specialization and industrial concentration patterns changed during the 1980–2000 period. The paper further aims to explore the driving forces of industrial concentration in Turkey's manufacturing industry, particularly during Turkey's economic integration process that started with trade liberalization after 1980 and further developed with the Customs Union in 1996. Regional specialization and industrial concentration are measured by GINI indices Turkey's NUTS-2 regions at the four-digit level for the years between 1980 and 2000. To investigate which variables determine industry concentration, systematic relation between the characteristics of the industry and industrial concentration is tested. Following the method proposed by Paluzie, Pons and Tirado, a panel regression equation is estimated, where the dependent variable is the Gini concentration index and the independent variables are the variables that represent the characteristics of the sectors that follow the predictions of classical trade theory, new trade theory and new economic geography. The major finding of the study is that during 1980–2000, Turkey's regions became more specialized and industry became more concentrated. Increases in the average values of regional specialization and industrial concentration support the prediction developed by Krugman hypothesis that regions become more specialized and industries become more concentrated with economic integration. In exploring the driving forces of industrial concentration, the findings demonstrate that firms tend to cluster in regions where there are economies of scale.

Notes

1. An earlier version of this paper was presented at the International Conference of Regional Studies Association in Leuven, Belgium, 8–9 June 2006.

2. For further information, see, http://www.competitiveturkey.org

3. The following variables and arguments follow closely those developed in Paluzie et al. (2001).

4. Location quotient (LQ) is a measure of the industry's concentration in an area relative to the rest of the nation. LQ = [(Industry's local employment)/(Total local employment)]/[(Industry's national employment/Total national employment)]. A location quotient greater than 1 means that the industry employs a greater share of the local workforce than it does nationally. LQ value greater than 1.25 is considered to be an initial evidence of regional specialization (for further information, see, “Business Clusters in the UK” A report for the Department of Trade and Industry by a consortium led by Trends Business Research).

5. For the definition and classification of industries according to technology level, see, OECD (2003) (http://www1.oecd.org/publications/e-book/92-2003-04-1-7294/).