Manufacturing and Regional Economic Growth in Turkey: A Spatial Econometric View of Kaldor's Laws

Abstract

In this paper, the regional economic growth process of Turkey during the period 1990–2000 is analysed within the context of Kaldor's laws. The validity of Kaldor's three growth laws is empirically tested by spatial econometric methods as well as traditional econometric method. The empirical results reported in this paper demonstrate the validity of the laws for Turkey over the period under discussion. In testing the first law, spatial dependence is detected. The presence of spatial dependence indicates that the growth of neighbouring regions (and indirectly, the growth of their manufacturing sectors) has an effect on the growth of a region. All the empirical findings suggest that manufacturing has a key role in regional economic growth.

Notes

See Karadağ et al. (2004) and Falcıoğlu and Akgüngör (2008) for more detailed information on the Turkish manufacturing sector.

Rowthorn (1975) claims that this relation must be defined as LPm_i  = δ₁ + δ₂ Em _i  + νl _i or g_i  = φ₁ + φ₂ E m_i  + ν_2i . Kaldor (1975) and Thirlwall (1980, 1983) insist that Kaldor's specifications are more appropriate by disaffirming Rowthorn's specifications.

Bernat (1996) defines normal as the growth rate predicted by Equation (10b).

The test results are robust to some variations in the specification of weight matrix W. The results obtained through the inverse-distance-squared matrix are presented in Tables A1–A3. The results based on the alternative distance matrices are available upon request from the author.

If both LM_lag and LM_err are statistically insignificant, we cannot proceed to the next step, checking out the robust statistics, to determine the form of spatial dependence (Anselin, 2005).