erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

Investment in Imported Machinery for Export Competitiveness:

Micro Evidence from Turkish Manufacturing Industry

Şule Özler (UCLA, USA)
Kamil Yılmaz (Koç University)

Abstract

Several strands of recent literature establish the background for our paper. First is the literature that underlines the importance of investment in machinery in increasing GDP growth rate (De Long and Summers (1991, 1992, 1993)). In the second, the importance of foreign knowledge embodied in imported machinery and equipment for the economy buying the equipment is highlighted (Coe and Helpman (1995) and Engelbrecht (1997), Coe, Helpman and Hoffmaister (1997), and Keller (2000)). Mody and Yilmaz (2000) combine the above two themes to assess the effectiveness of imported machinery in increasing export competitiveness; using cross-country data, they find that imported machinery increases export competitiveness.

In this paper, we use plant level data to asses the effectiveness of imported machinery in increasing export competitiveness, and as such we also draw from the recent literature on studies that highlight significance of producer heterogeneity even in narrowly defined industry groupings (Clerides, Lach, and Tybout (1998), Bernard and Jensen (1999)). The data used here is for the Turkish manufacturing industry during the 1991-1996 period. We estimate establishment level production functions and find that an increase in imported share of machinery stock increases total value of exports, but not total value of domestic sales of exporting establishments. Similar to the finding on domestic sales of exporting establishments, imported machinery share of the capital stock has no impact on the value of sales of non-exporting establishments.

Our findings support the view that investment in imported machinery and equipment is a requisite dictated by the adoption of export-oriented strategy and the scope of international competition. Thus the evidence suggests that policies that hamper imports of machinery and equipment is likely to diminish export competitiveness.

Economic Research Center
Middle East Technical University
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