Growth Cycles and Total Factor Productivity in Turkish Economy: 1980-2018

Ozan Bakış, Uğurcan Acar and Gökhan Dilek

It has been stated that, in order to avoid middle-income trap and to converge to developed countries income levels, Turkish economy must grow above 5% annually on average. Although fixed capital investments and increase in employment are factors that contribute to economic growth, they are not sufficient for strong and sustainable economic expansion. Strong and solid GDP growth cannot be achieved without increases in knowledge, technological advances, and more efficient reallocation of existing resources. To put it simply, for a sustainable economic performance Total Factor Productivity (TFP) is a must.

Compared to Turkey, China, South Korea, and India have higher and steady growth rates. The main difference between Turkey and these countries is that they have higher TFP growth rates.

The average TFP growth is 1% for Turkish economy in the 1980-2018 period. The fastest TFP growth is achieved in the 1980-1989 period with 2.2% annual average growth rate. For the 2003-2013 period the annual average TFP growth is 1.2% while it is 0.4% for the years between 1990 and 2002. The TFP growth is lowest in the 2014-2018 period where it remains constant over this period.

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