Working Paper: CEPR ID: DP14070
Authors: Daron Acemoglu; Murat Er
Abstract: Turkey’s economy has made important strides in the 17 years since the financial crisis of 2001, averaging an annual growth rate of about 5.7%. But the quality of this growth has been poor, especially since 2007, with little-to-no productivity growth, limited technological upgrading, substantial (mis)allocation of resources to the construction sector and a huge surge in credit. This growth has also been generally unequal. This low-quality, unequal growth has been in the context of worsening economic institutions, underpinned by deteriorating political institutions.This paper attempts to understand the causes and consequences of low-quality growth in Turkey, briefly interrupted by a period of higher-quality growth between 2002 and 2006. The main thesis of our paper is that the lack of high-quality, shared growth in Turkey is rooted in the nature and evolution of its economic institutions, which are themselves closely linked to the country’s political institutions. The short episode of high-quality and more equally shared growth came as a result of institutional improvements, but duly disappeared as these institutional gains were reversed.
Keywords: economic growth; emerging markets; high-quality growth; institutions; productivity; shared prosperity; turkey
JEL Codes: E65; O52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| institutional quality (L15) | economic outcomes (F61) |
| institutional improvements (O17) | high-quality growth (2002-2006) (O29) |
| high-quality growth (2002-2006) (O29) | productivity improvements (O49) |
| institutional quality (L15) | low-quality growth (O44) |
| low-quality growth (O44) | misallocation of resources (D61) |
| low-quality growth (O44) | inequality (D63) |
| institutional inclusivity (I24) | high-quality growth (O44) |
| educational attainment and skill levels (J24) | productivity growth (O49) |
| economic growth (O49) | factor accumulation (E22) |