An Empirical Analysis of the Impacts of Investment Incentives on Provincial Economic Growth in Turkey
DOI:
https://doi.org/10.17059/ekon.reg.2023-3-22Keywords:
investment incentives, growth, regional growth, panel data analysis, system GMM, sectoral analysis, TurkeyAbstract
There are significant differences between governments in the context of the objectives of incentive policies. However, they are generally focused on macroeconomic purposes such as eliminating regional inequalities and increasing investment level, employment, industrialisation and therefore raising economic growth. In Turkey, The New Investment Incentive System, which has been implemented since 2012, essentially aimed to mitigate interregional inequalities. This study investigates the impact of investment incentives on provincial per capita growth of 81 provinces for the years 2004-2017. Our data are also available for capital types and sectoral levels. The dynamic panel data estimates show that while the impact of the number of incentive certificates on provincial growth is significantly positive, there is no effect of fixed investment and employment on provincial growth. Moreover, given the significantly positive estimated coefficients on all three measures of investment incentives for the energy and manufacturing sectors, we conclude that incentives raise provincial growth for these two sectors. However, investment incentives in services, mining and agriculture sectors have no impact on regional growth. Results of the analysis of investment incentives by investor type imply that while investment incentives provided to domestic firms have no effect on growth, incentives for firms owned by foreigners have positive effects. Our study thus makes important contributions to the literature by considering both province-level incentive measures and five main sectors, namely energy, manufacturing, services, mining and agriculture in the sectoral analysis.
References
Adamek, E. & Rybkova, L. (2015). Influence of Investment Incentives on Development of Regional Unemployment in the Czech Republic. European Journal of Business Science and Technology, 1(1), 5-14. DOI: https://doi.org/10.11118/ejobsat.v1i1.33
Akan, Y. & Arslan, İ. (2008). Employment Analysis with Sectoral Investment Incentive Documents in Turkey: An Application in the Eastern Anatolia Region (1980-2006). Çalışma ve Toplum [Labour and Society], 1, 107-119. (In Turk.)
Arellano, M. & Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. Review of Economic Studies, 58, 277-297. DOI: https://doi.org/10.2307/2297968
Baum, C. F., Schaffer, M. E. & Stillman, S. (2003). Instrumental Variables and GMM: Estimation and Testing. The Stata Journal, 3(1), 1-31. DOI: https://doi.org/10.1177 %2F1536867X0300300101
Baum, C. F., Schaffer, M. E. & Stillman, S. (2007). Enhanced Routines for Instrumental Variables / GMM Estimation and Testing. The Stata Journal, 7(4), 465-506. DOI: https://doi.org/10.1177 %2F1536867X0800700402
Blundell, R. & Bond, S. (1998). Initial Conditions and Moment Restrictions in Dynamic Panel Data Models. Journal of Econometrics, 87, 115-143. DOI: https://doi.org/10.1016/S0304-4076(98)00009-8
Bondonio, D. & Greenbaum, R. T. (2006). Do Business Investment Incentives Promote Employment in Declining Areas? Evidence from EU Objective-2 Regions. European Urban and Regional Studies, 13(3), 225-244. DOI: https://doi.org/10.1177/0969776406065432
Bunker, R. B. (2013). Are Regional Tax Investment Incentives A Zero-Sum Game? An Empirical Analysis of the Gulf Opportunity Zone Act of 2005. Journal of Accounting and Finance, 13, 118-133.
Fowowe, B. (2013). Do Fiscal Incentives Promote Investment?: Empirical Evidence from Nigeria. The Journal of Developing Areas, 47(2), 17-35. DOI: https://doi.org/10.1353/jda.2013.0029
Gabe, T. M. & Kraybill, D. S. (2002). The Effect of State Economic Development Incentives on Employment Growth of Establishments. Journal of Regional Science, 42(4), 703-730. DOI: https://doi.org/10.1111/1467-9787.00278
Hansen, L. P. (1982). Large Sample Properties of Generalized Method of Moments Estimators. Econometrica, 50, 1029-1054. DOI: https://doi.org/10.2307/1912775
Jensen, N. M. (2017). The Effect of Economic Development Incentives and Clawback Provisions on Job Creation: A Pre-Registered Evaluation of Maryland and Virginia Programs. Research and Politics, 4(2), 1-8. DOI: https://doi.org/10.1177 %2F2053168017713646
Öz, E. & Buyrukoğlu, S. (2017). Empirical analysis of the impact of macroeconomic variables implemented investment incentives on policies in Turkey. Pamukkale Üniversitesi Sosyal Bilimler Enstitüsü Dergisi [Pamukkale University Journal of Social Sciences Institute], 27, 322-336. (In Turk.)
Özkök, Y. (2009). Türkiye’de Yatırım Teşviklerinin Bölgesel Gelişmişlik Bazında Değerlendirilmesi [Evaluation of Investment Incentives in Turkey Based on Regional Development]. Master’s Thesis, Gaziantep University Social Sciences Institute. The Higher Education Council Thesis Center. Retrieved from: https://tez.yok.gov.tr/UlusalTezMerkezi/ (Date of access: 10.02.2021) (In Turk.)
Parys, S. V. & James, S. (2010). The Effectiveness of Tax Incentives in Attracting Investment: Panel Data Evidence from the CFA Franc Zone. International Tax Public Finance, 17(4), 400-429. DOI: https://doi.org/10.1007/s10797-010-9140-1
Recepoğlu, M. & Değer, M. K. (2016). The effect of regional investment incentives on regional economic growth in Turkey: panel data analysis on level 2 regions (2004-2011). Kastamonu Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi [Kastamonu University Journal of the Faculty of Economics and Administrative Sciences], 14(4), 6-21. (In Turk.)
Şahin, M. & Uysal, Ö. (2011). A Shift-Share Analysis of Investment Subsidies in the Framework of Regional Development. Maliye Dergisi, 160, 111-138. (In Turk.)
Schalk, H. J. & Untiedt, G. (2000). Regional Investment Incentives in Germany: Impacts on Factor Demand and Growth. The Annals of Regional Science, 34, 173-195. DOI: https://doi.org/10.1007/s001689900008
Sevinç, H., Emsen, Ö. S. & Bozkurt, E. (2016). An Analysis about Determining the Regional Distribution of Investment Incentives: Turkey Case. Çankırı Karatekin Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, [Çankırı Karatekin University Journal of The Faculty of Economics and Administrative Sciences], 6(1), 525-556. DOI: https://doi.org/10.18074/cnuiibf.302 (In Turk.)
Solow, R. M. (1957). Technical Change and the Aggregate Production Function. The Review of Economics and Statistics, 39(3), 312-320. DOI: https://doi.org/10.2307/1926047
Tung, S. & Cho, S. (2001). Determinants of Regional Investment Decisions in China: An Econometric Model of Tax Incentive Policy. Review of Quantitative Finance and Accounting, 17, 167-185. DOI: https://doi.org/10.1023/A:1017925721627
Yanikkaya, H. & Karaboga, H. (2017). The Effectiveness of Investment Incentives in the Turkish Manufacturing Industry. Prague Economic Papers, 26(6), 744-760. DOI: https://doi.org/10.18267/j.pep.641
Yavan, N. (2011). Teşviklerin Sektörel ve Bölgesel Analizi Türkiye Örneği [Sectoral and Regional Analyses of Investment Incentives: Turkish Case]. Maliye Hesap Uzmanları Vakfı Yayınları, 27. (In Turk.)
Yavuz, A. (2010). Effect of investment incentives on special cut investments and employment under competitive conditions as a fiscal policy instrument: an econometric analysis. Süleyman Demirel Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi [Suleyman Demirel University Journal of Faculty of Economics and Administrative Sciences], 15(1), 83-101. (In Turk.)
Zheng, L. & Warner, M. E. (2010). Business Incentive Use Among U.S. Local Governments: A Story of Accountability and Policy Learning. Economic Development Quarterly, 24(4), 325-336. DOI: https://doi.org/10.1177/0891242410376237
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Яниккая Халит , Алтай Кюбра
This work is licensed under a Creative Commons Attribution 4.0 International License.
