Empirics of economic growth in Turkey

Abstract

In the empirics of growth literature method proposed by Mankiw et al. (1990) has been widely used to test the determinants of economic growth and the speed of convergence. This framework, however, considers technological progress as constant and idencital across countries and/or regions. In this study, I propose a production function that uses electricity as a factor of production to produce output and check the speed of convergence of per capita output. Electricity is regarded to be produced from clean and dirty sources given an elasticity of substitution. Electricity output is weighted by these elasticities in order to see their effect on convergence. Based on the appilication of the system GMM approach contrasted with the Within Group and OLS results, I key out conditional convergence analysis over 2002-2013 based on regional data for Turkey. Econometric results indicate overall convergence of per capita income across regions in general, noting that each development region converges to its own steady state. Results obtained from OLS and Within Group regressions fail to be significant. I have also found out that the non-thermal electricity production has a signiffcantly positive effect on growth rate when GMM method is applied, wheras electricity production by thermal sources has no significant effect on the growth rate. Finally, I have also found that the share of specialized lending in credit demand tends to increase the growth rate.