Political business cycles, institutional structure and budget deficits in Turkey

İbrahim Tutar and Aysit Tansel

This study tests the existence of political business cycles and effects of various institutional factors on budget deficits in Turkey. For this purpose, the annual (for 1960-1996), quarterly (for 1983:Q1-1997:Q2) and the monthly data (for 1990:01-1997:6) are used. Results with the annual data show that as the number of parties in a coalition government and the number of fiscal authorities increase, the budget deficits also increase while elections do not significantly affect the budget deficits. However, the coalitions, military coups, petroleum shocks, the Cyprus war and terrorism have significant and negative effects on budget deficits. Quarterly data shows that elections, number of parties in a coalition government and the number of fiscal authorities have some effects on sub items of the budget though they do not affect the budget deficit significantly. On the other hand, monthly data show that especially elections have significant and negative effects on the budget deficit and on all of the sub items of the budget except the investments. However, monthly data do not indicate any significance for the effects of number of fiscal authorities and the number of parties in the coalition governments. The analysis with monthly data of budget subtotals clearly indicate the existence of political business cycles for the period 1990-1996. Therefore, while the analyses with the annual data disguise the effects of elections, the analyses with quarterly and monthly data reveal the existence of political business cycles. Moreover, quarterly data indicate that the political power dispersion increases the transfer expenditures. We stress some policy implications of these analyses. The emphasis is on the unification of fiscal authorities, and reducing off-budget expenditures.

Wage earners, self employed and gender in the informal sector in Turkey

Aysit Tansel

This study considers covered and uncovered wage earners and the self-employed. The analysis is carried out for men and women workers separately. 1994 Turkish Household Expenditure Survey is used first to examine how individuals are selected into the covered and uncovered wage earner and the self-employed categories. Next, selectivity corrected wage equations are estimated to examine wage determination in these sectors. Oaxaca-Blinder decomposition of sector of work and male-female wage differentials are carried out. When controlled for the observed characteristics and sample selection, for men, covered wage earners earn more than the uncovered wage earners and the self-employed. For the covered wage earners, men’s expected wages are about twice higher than the women’s wages. For the uncovered wage earners, men’s wages are near parity with those of women. These results suggest segmentation for men along the formal and informal lines and substantial discrimination for women in the covered private sector.

Public employment as a social protection mechanism

Aysit Tansel

This paper gives information about public sector employment and wages in Turkey over the recent years. Central government employment, state owned enterprise employment and local administration employment are examined separately. Educational distribution of the civil servants and the state owned enterprise employees are displayed. Wages of civil servants, the state owned enterprise workers and those of in private sector are discussed. Public and private manufacturing sector wages are examined. Real personnel expenditures of the central and local governments are displayed. The share of personnel costs in the state budget and as percentage of GNP is discussed. Where possible, international comparisons are provided in all cases.

Budget deficits, money growth and inflation: The Turkish evidence

Erdal Özmen and Ayça Tekin Koru

This paper investigates the long-run relationships between budget deficits, inflation and monetary growth in Turkey considering two alternative trivariate systems corresponding to the narrowest and the broadest monetary aggregates. While the joint endogeneity of money and inflation rejects the validity of the monetarist view lack of direct relationship between inflation and budget deficits makes the pure fiscal theory explanations illegitimate for the Turkish case. Consistent with the policy regime of financing domestic debt through commercial banking system budget deficits lead to a growth not of currency seigniorage but of broad money. This mode of deficit financing, leading to a creation of near money and restricting the scope for an effective monetary policy, may not be sustainable, as the government securities/braod maoney raito cannot grow without limit.

Productivity in Turkish manufacturing industry: A comparative analysis on the basis of selected provinces

A. Özlem Önder and Aykut Lenger

One of the main concerns of the studies dealing with competitiveness and growth accounting is productivity in manufacturing industry. However, the overall consideration of productivity on the national level leads us to ignore the fact that productivity rates may diversify among regions within a country. A comparison of productivity on regional level might provide policy-makers with the necessary information to attain efficiency in the allocation of resources among regions. This paper compares the productivity levels in manufacturing industry on the basis of 19 selected provinces in Turkey for 1994-97. The analysis is based on labor productivity, capital productivity and total factor productivity (TFP). The capital stocks of manufacturing industry at the province level were estimated to use as input in computation of TFPs. The estimations of productivity in the public and private sector were also provided for each province. Our results suggest that, contrary to the common view, productivity levels in the public sector exceed the ones in the private sector in most indicators.

Training policies and economic growth in an evolutionary world

Gerard Ballot and Erol Taymaz

The role of training and human capital accumulation as a source of innovation and growth is studied within an evolutionary micro-simulation model. Firms within the model learn about technology through radical/incremental innovation and imitation. General human capital increases the probability of innovation whereas specific human capital increases technical efficiency. Firms endogenously determine the level of investment in fixed and current assets, R&D activities, and education and training. Human capital accumulation through investment in education and training is shown to be source of economic growth even though firms tend to underinvest in these activities because they cannot fully recoup training costs when workers quit. The paper investigates the effects of various training policies on macro-performance. The first policy is to subsidise all education and training activities. The second policy requires firms to spend a certain percentage of the wage bill on training activities. In the third case, the government subsidies training activities if the firm hires unemployed people, and pays the social security contributions for one year. We experiment with these policies because many European countries adopt similar policies to cure the unemployment problem and to enhance economic growth. By running 101 experiments for each policy, increasing the parameter value step by step, we are able to test the impact of training policies on macroeconomic performance (manufacturing growth rates, unemployment, etc.), and to estimate policy elasticities through econometric techniques. The results suggest that some subsidy policies are effective in improving the long-run macro-performance while a minimum requirement to train set upon firms is not.

Firms’ human capital, R&D and performance: A study on French and Swedish firms

Gerard Ballot , Fathi Fakhfakh and Erol Taymaz

This paper studies the effects of human and technological capital on productivity in a sample of large French and Swedish firms. While the role of technological capital as measured by R&D has been intensively investigated, almost no work has been done on the role of human capital as measured by firm sponsored training, and even less its interaction with technological capital. The level of intangible capital may also have a lasting effect on productivity growth, as emphasised by some endogenous growth models in a macroeconomic setting. The study uses data from two panels of large French and Swedish firms for the same period (1987-93). It constructs measures of a firm’s human capital stock, based on their past and present training expenditures. The results confirm that firm sponsored training and R&D are significant inputs in the two countries, although to a different extent, and have high returns. However, except for managers and engineers in France, we do not find evidence of positive interactions between these two types of capital. Finally, growth effects at the firm level do not appear.

Türkiye’de ve seçilmiş ülkelerde eğitimin getirisi

Aysit Tansel

Diğer yatırımlarda olduğu gibi, eğitime yapılan yatırımlar da getiri oranları bakımından değerlendirilmektedir. Eğitime yatırımın toplumsal ve özel getirilerin çesitli eğitim seviyeleri, program türleri ve toplumsal cinsiyet bakımından hesaplanması, eğitim politikalarının ve reformların geliştirilmesinde izlenecek politika sorunlarına yanıt aramada önem taşır. Bu makale, eğitimin getiri oranlarına ilişkin olarak son yıllarda yapılan kestirimlerin, Türkiye ve seçilmiş ülkeler için bir taramasını sunmaktadır. Eğitimin getiri oranlarının hesaplarına göre, özellikle gelişmekte olan ülkelerde, öğrenim düzeyi yükseldilçe, toplumsal ve özel getirilerin her ikisi de azalmaktadır. Son yıllarda yapılan araştırmalar, bazı ülkelerde, örneğin Türkiye ve İspanya’da özel getirilerin öğrenim düzeyiyle arttığını göstermektedir. Birçok ülkede kadınların eğitiminin getirisi erkeklerinkinden daha yüksektir. Türkiye’de hem kadın hem de erkekler için meslek lisesi eğitiminin özel getirisi, genel liselerin özel getirisinden yüksektir. Mısır’da kadınlar için meslek programlarının getirileri, genel programlarınkinden daha azdır; fakat erkekler için tersi doğrudur. Mısır’da ve Türkiye’de çeşitli eğitim düzeylerinde, eğitimin getirisi özel sektörde kamu kesimine göre daha yüksektir.

Exchange rate regimes and the Feldstein-Horioka Puzzle: The French evidence

Erdal Özmen and Kağan Parmaksız

This paper investigates whether the Feldstein and Horioka (1980) argument on domestic saving-investment relationship is supported by the French data when an endogenous structural break coresponding to a major policy regime change is taken into account. The evidence suggest that the saving-investment cointegration disappears after the estimated endogenous structural break point in 1973 coinciding with the end of the Bretton Woods System of fixed exchange rates. Consistent with a current acoount targeting policy, an investment-driven saving process appears to be the case for the fixed exchange rate regime period.

Long memory in Turkish inflation rates

Haluk Erlat

Turkey is a high inflation country but, as opposed to other countries like Argentina, Brazil and Israel where periods of high-inflation occurred, the inflation in Turkey is not hyper-inflation; in other words, it does not reach large three-digit levels annually, but remains around a figure which is, consistently, greater than fifty percent but never goes beyond a hundred percent except for a couple of months in 1994. This observation implies that inflation in Turkey may have a highly persistent nature. The question is whether this persistence is due to the inflation rate having a unit root or whether it is stationary but exhibits long-memory. Investigations of this nature have been undertaken for developed countries (Hassler and Wolter, 1995) plus high inflation countries like Argentina, Brazil and Israel (Baillie, Chung and Tieslau, 1996) plus developing countries (Baum, Barkoulas and Caglayan, 1999). The latter paper includes Turkey and investigates long-memory, via fractional integration, in CPI-based inflation using monthly series for the period 1971-1995. In our study, we depart from Baum et. al. by considering the 1987.01-2000.01 period for which the 1987-based series exist, thereby avoiding spurious jumps in the data due to splicing different series, and also by investigating WPI-based inflation for the 1987.01-2000.01 period. We first tested (using a procedure due to Vogelsang (1999)) for the presence of additive outliers (AO) in the inflation ratios and, having identified the statistically significant ones, we applied the ADF test with AO dummies included in the regression (Franses and Haldrup, 1994) and the modified Phillips-Perron test (Ng and Perron, 2000) as suggested by Vogelsang, since it is expected to be robust against AOs. The results of these first-stage investigations indicate that the presence of a unit-root cannot be established unequivocally except for the public-sector WPI based inflation rates where it was found to be absent. Given this situation, we turned to investigating long-memory in the inflation series using Autoregressive Fractionally Integrated Moving Average models and obtained values for the fractional integration parameter between 0 and 0.5, indicating that the monthly inflation rate is essentially stationary but has, in general, a significant long memory component. This value is slightly below 0.30 for CPI and public WPI based inflation rates, and close to 0.50 for overall WPI and private sector WPI based inflation rates. These results indicate that the recent, IMF-backed attempt by the government to reduce inflation has to deal with a process which, essentially, is not nonstationary but has a strong-long memory component and will exhibit a great deal of resistance initially, but if the anti-inflationary policy is successful, would yield long-lived results.

Surplus analysis in peripheric economies: An application to Turkey

Cem Somel

Some writers have argued that the allocation of the economic surplus in underdeveloped countries between non-essential consumption and investment is determined mainly by the distribution of the surplus among classes with different propensities for investment, and that the drain of the surplus out of underdeveloped countries is of secondary importance. This paper argues that the domestic use of the surplus is determined by the incentives and constraints of the political-economic environment that encouraging consumption and discouraging investment, and that the distribution among classes is of secondary importance. Secondly, it tries to show, with an application to Turkish data for 1980-1996, how domestic misuse of the surplus and the drain of surplus abroad can be estimated simultaneously. The surplus is estimated by subtracting essential consumption from net national product and adding the drain abroad arising from exchange rate distortion in trade.

Türkiye’de kentleşmenin izlediği yol üzerine: Bir dönemleme girişimi

Tarık Şengül

The IMF and reforming the public sector in Turkey

Nazım K. Ekinci

The latest three-year stand-by agreement with the IMF that was concluded in December 1999 addresses precisely the reforming public sector in Turkey which has pervasive implications. The program can be seen as a continuation of the IMF-World Bank sponsored program of the early eighties. The main aim of the paper is to explain the conditions that led to the making of the latest stand-by agreement by setting it against the evolving role of the IMF in crisis prevention. The agreement is in fact one of the first examples of the type of program that is indicative of the new role of the Fund. The role of the US in extending a preferential political treatment for Turkey has also been instrumental in the making of the agreement. An overview of the agreement and a discussion of its broader implications for the public sector and state-society relations are also provided.

Policy regime change and the Feldstein-Horioka puzzle: The UK evidence

Erdal Özmen and Kağan Parmaksız

This study investigates whether the Feldstein and Horioka (1980) argument on the domestic saving-investment relationship may remain as a "puzzle" when an endogenous structural break corresponding to a major policy regime change is taken into account. To this end, we employ not only the conventional procedures developed for a data generation process without a break, but also some recent methods which allow stationarity around an endogenous break under the alternative hypothesis. The evidence based on the UK annual data from 1948 to 1998 suggests that the long-run relationship between saving and investment disappears after the estimated endogenous structural break point coinciding with the abolition of foreign exchange controls in 1979.

Provincial inequalities in school enrollments in Turkey

Aysit Tansel and Ayadım Deniz Güngör

Provincial inequality indexes in school enrollments are computed for the years 1980 and 1994 using primary, middle and high school enrollment rates for the provinces of Turkey. Summary measures of both interprovince and intraprovince inequality are computed for the two years; the former measure is an indicator of inequality across provinces, and the latter measure is an indicator of inequality in "access to education" within provinces. The purpose is to provide a nearly fifteen-year perspective on provincial inequalities at each level of schooling and also of inequalities across the three levels of schooling in each province. Several main points are noted. First, as expected, inequality in enrollments across provinces was lowest at the primary school level since primary schooling is compulsory. Second, except at the high school level, inequality in enrollments declined between 1980 and 1994. Third, the results indicate higher female enrollment inequalities than those found for total enrollments at all levels of schooling. Fourth, the results for "convergence" models explaining interprovince changes in enrollment rates indicate convergence at the primary and middle school levels. Fifth, per capita income and degree of rurality of each province are important determinants of intraprovince inequality.

Medya tercihleri ve nedenleri: Ankara 1999

Zehra Kasnakoğlu , Erkan Erdil , Emel Memiş and Emre Özçelik

Bu çalışmanın amacı, Ankara ilinde değişik sosyo-ekonomik gruplardan bireylerin medya konusundaki tercihlerini saptamaktır. Bu makale kapsamında, seçilen bireylerin hangi gazete ve dergileri okudukları, hangi televizyon programlarını izledikleri, hangi radyo programlarını dinledikleri irdelenmekte ve bu tercihlerin, cinsiyet, yaş, eğitim ve gelir düzeyi gibi etmenlere göre ne denli farklılık gösterdiği istatistiksel olarak sınanmakta ve farklılık nedenleri incelenmektedir. Çalışma, Aralık 1998'de Ankara kentsel kesiminde yapılan anket çalışmasıyla derlenen verilere dayanmaktadır. Hazırlanan soru kağıtları, değişik sosyo-ekonomik grupları temsil edecek semtlerde 15 yaşından büyük 800 bireye uygulanmıştır. Çalışmada önce anket yapılacak semtler belirlenmiştir. Haneye ulaşma ve kabul edilme zorlukları gözönünde tutularak, anketler sinema, süpermarket, fast-food restoran gibi değişik yaş, eğitim ve gelir grubundan bireylerin bulunacağı yerlerde seçilen fertlere uygulanmıştır. Araştırmada örneğe çıkan tüm bireylerin evinde en az bir, %70'inde ise iki veya daha fazla sayıda televizyon bulunmaktadır. Televizyon seyretmeye ayrılan zaman daha çok mesai saatleri dışında, radyo, dergi ve gazete gibi diğer medya araçlarına ayrılan zaman ise daha çok mesai saatleri içindedir. Haber alma aracı olarak, daha çok televizyon kullanılmakta, bunu gazete izlemektedir. Deneklerin yarıdan fazlası medyanın yeterince özgür olmadığını düşünürken, yarısına yakını da bazı durumlarda sansürü savunmaktadır. Anketlerden çıkan ilginç sonuçlardan birisi tercih edilme ile güvenilir olma özelliklerinin adeta bağımsız olmasıdır. Fiyat ve promosyon faktörlerinin deneklerin gazete tercihlerinde, ahlaka uygunluk faktörünün ise televizyon kanalı seçimlerinde önemli rol oynamadığı gözlenmektedir.