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D. Main Contributors to Poverty Reduction Capacity, and Labor Market Outcomes Are High and Persistent

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D. Main Contributors to Poverty Reduction Capacity, and Labor Market Outcomes Are High and Persistent Public Disclosure Authorized Public Disclosure Authorized Systematic Country Diagnostic Turkey’s Future Transitions Public Disclosure Authorized Towards Sustainable Poverty Reduction and Shared Prosperity Public Disclosure Authorized II III Turkey’s Future Transitions Towards Sustainable Poverty Reduction and Shared Prosperity Systematic Country Diagnostic October 12, 2016 IV V ABBREVIATIONS AND ACRONYMS AFAD Prime Ministry Disaster and Emergency Management Presidency BEEPS Business Environment and Enterprise Performance Survey CEPEJ European Commission for the Efficiency of Justice CPI Consumer Price Index ECA Europe and Central Asia ECE Early Childhood Education EE Energy Efficiency EIA Environmental Impact Assessment EMRA Energy Market Regulatory Authority EPIAS Energy Exchange EU European Union FDI Foreign Direct Investment GDP Gross Domestic Product GNI Gross National Income HBS Household Budget Survey IRA Independent Regulatory Agency LFP Labor Force Participation LFS Labor Force Survey LNG Liquefied Natural Gas LPI Logistics Performance Index NUTS2 Nomenclature of Territorial Units OECD Organisation for Economic Co-operation and Development PFMC Public Financial Management and Control PISA Program for International Student Assessment PMR Product Market Regulation PPL Public Procurement Law PPP Purchasing Power Parity R&D Research and Development Vice Presidents: Cyril Muller, Dimitris Tsitsiragos SCD Systematic Country Diagnostic IBRD Country Director: Johannes Zutt SILC Survey on Income and Living Conditions IFC Regional Director: Tomasz Telma SME Small and Medium Enterprise Senior Directors: Felipe Jaramillo, Ana Revenga SuTPs Syrians Under Temporary Protection TDHS Turkey Demographic and Health Survey Practice Director: Satu Kahkonen TEIAŞ Electricity Transmission Company Practice Managers: Ivailo Izvorski, Carolina Sanchez-Paramo TFP Total Factor Productivity Co-Task Team Leaders: Ulrich Bartsch, P. Facundo Cuevas TUIK Turkiye Istatistik Kurumu (Turkish Statistical Institute) TVET Technical and Vocational Education and Training WDI World Development Indicators WEF World Economic Forum UNHCR United Nations High Commissioner for Refugees CURRENCY EQUIVALENTS (Exchange Rate as of May 1, 2016) Currency Unit US$1.00 Turkish Lira TL 2.86 Weights and Measures: Metric System VI VII CONTENTS Resource Allocation 94 Innovation 95 Entrepreneurship 96 LIST OF TABLES, FIGURES AND BOXES VIII Corporate Governance 97 ACKNOWLEDGEMENTS XI D.Providing Finance 98 E.Setting Rules and Enforcing Them 102 OVERVIEW 1 Institutional Quality 103 A. Who Will Likely Be the Poor and the Bottom 40? 5 Competition 105 B. What Will Be the Engine of Growth? 7 Corruption 107 C. How Can Growth Be Sustainable? 8 Judicial Services 107 D. Prioritization 9 E. Outline of the study 14 3. HOW CAN GROWTH BE SUSTAINABLE? 111 A.Increasing Urbanization 111 1. WHO WILL LIKELY BE THE POOR AND THE BOTTOM 40? 19 B.Greening Turkey’s Growth 114 A.Progress in Reducing Poverty 19 Environmental Footprint 115 B.Progress in Sharing Prosperity 30 Water 117 C.Profiling the Poor and the Bottom 40 35 Energy 119 D.Main Contributors to Poverty Reduction 41 Land 121 Challenges Across Regions 48 C.Investing in Resilience 122 E. Projections for Poverty and Shared Prosperity in 2025 53 Participation of Women in the Workforce 56 4. PRIORITIZATION 125 Investment in Human Capital: Education, Skills, and Health 62 A. A Conceptual Model for Creating Good Jobs 128 Income Dynamics Simulation 68 B. Solid Foundations 130 C. Productive Individuals 132 2. WHAT WILL BE THE ENGINE OF GROWTH? 71 D. Dynamic Firms 133 A.Turkey’s Economic Growth through the Macro-Economist’s Lens 72 E. Public Assets and Resources 135 Growth Accounting 78 Macro-fiscal Risks 82 REFERENCES 141 B.Prospects for Agriculture 85 C.Making Things Better and Better Things 89 ANNEX 1. DATA GAPS DIAGNOSTIC 149 VIII IX LIST OF Middle Class in Selected Countries, Multiple Years (in percent of total 1.8 34 population) TABLES 1.9 Poverty Profile by Circumstances at Birth, Wealth Deciles, 2013 37 O.1 List of Constraints and Scores 15 Change in Income Poverty and Inequality Resulting from Changes in 1.10 44 Sources of Income Demographic Profile of Poor, Non-poor, and Bottom 40 Populations, 1.1 36 2014 1.11 Market and Non-market Income, 2006–13 (percentage change) 45 1.2 Profile of Populations in an Assets Framework, 2014 39 Number of People Receiving Pensions, 2006–14 (thousands of individuals 1.12 46 and percentage change) 1.3 Growth and Inequality Poverty Decomposition (percentage points) 41 1.13 Net Job Creation and Formalization Took Place Across All Sectors 47 Intra and Inter Area Poverty Decomposition, 2002–13 (in percentage of 1.4 43 overall poverty reduction) 1.14 Decomposition of Labor Income Growth between 2006 and 2013 49 A Typology of Regions by Their Level of Endowments, Use and Returns Number of Poor across Turkey’s 26 Regions, 2007–12 (number of people 1.5 51 1.15 50 of Household Assets below poverty line) 2.1 Potential GDP Growth Scenarios (2016–30) (percentage change) 81 1.16 Unemployment Rates Across Turkey’s Regions 52 2.2 Farming Systems and Strategies for Growth 98 1.17 Minimum Wages in Turkey, 2004–16 (real terms) 55 4.1 List of Constraints and Scores 137 1.18 Demographic Changes, 1950–2075 (in percent) 56 A.1 Priority Data Gaps Identified, Implications and Recommendations 150 1.19 Population and Education Projection, 2015–2025 57 1.20 Female LFP in OECD Countries, EU and Turkey, 1995–2013 59 FIGURES 1.21 Female LFP by Age Cohort (in percent) 60 O.1 Turkey’s Rank in Indicators of Institutional Quality 4 1.22 Evolution of Female LFP by Skill Levels in Urban and Rural Areas 61 O.2 Conceptualization of the Road to Good Jobs 12 Levels and Changes in PISA Scores Across Countries, 2003–2012 1.23 64 (average points, annualized point change) 1.1 Headcount Poverty Rates, 2002–14 21 1.24 Life Expectancy at Birth 2000–2014 67 1.2 Poor and Number of Poor in ECA Countries, around 2013 25 1.25 Growth Incidence Curves, 2025 (percentage change from 2010) 69 1.3 Incidence of Income Poverty in 26 Regions, 2013 (in percent) 26 2.1 GDP and Its Components (percent change) 74 Changes in Poverty Incidence in 26 regions (percentage change from 1.4 27 2006 to 2013) 2.2 Turkey’s Capital Stock in Comparison (in US$, 2005 PPP) 75 Shared Prosperity in Turkey and Peers, 2005–13 (annualized percentage 1.5 31 2.3 Turkey’s Logistics Performance in Comparison, 2014 (index numbers) 77 change) 2.4 Saving and Consumption (percent of GDP) 78 1.6 Gini Coefficient, 2002–14 32 2.5 Drivers of Growth in Different Political Periods (percentage change) 80 1.7 Poor, Vulnerable, and Middle Class, 2002–14 (in percent) 33 2.6 Structural Change and Productivity Growth, 1981–2010 (percent) 90 X XI 2.7 From Sectors to Tasks-based Development Strategies 91 Sophistication of Production, 2003–-2013 (percent share in total value 2.8 92 added) ACKNOWLEDGEMENTS 2.9 Medium- and High-tech Exports, 2000–12 (percent share) 93 2.10 Dispersion of Revenue TFPR, 2004 - 13 (density function) 97 2.11 Science and Innovation Indicators, 2014 This report was led by Ulrich Bartsch (Lead Economist, GMFDR) and Facundo Cuevas (Senior Economist, GPVDR), with the guidance of Johannes Zutt 2.12 Turkey’s Rank in Indicators of Institutional Quality 103 (Country Director, ECCU6), Ivailo Izvorski (Practice Manager, GMFDR), 2.13 Improvements in Doing Business Indicators, 2001 - 07 and 2008–14 104 and Carolina Sanchez-Paramo (Practice Manager, GPVDR). The report was 3.1 Turkey’s Urbanization in Comparison, 1980–2012 112 prepared in collaboration between IBRD and IFC, the latter under leadership 3.2 Turkey’s Public Transport Ca pacity in Comparison, 2009 114 of Tomasz Telma (Regional Director, CEUDR) and Aisha Williams (Turkey Country Manager, CTKFO). Marina Wes (Country Manager, ECPL), Hans 3.3 Change in Energy Intensity, 2005 - 11 (percent change) 116 Lofgren (Senior Economist, DECPG), Felipe Jaramillo (Senior Director, Relationship between GDP per Capita and Motorization Rate, 2003–09 3.4 117 GMFDR), Raju Singh (Program Leader, LCC8C), and Ambar Narayan (Lead (motor vehicles per 1,000 people) Economist, GPVDR) contributed useful guidance as peer reviewers. Martin Water Availability and Demand Projections Using Two Climate Scenarios 3.5 118 Raiser (former Turkey Country Director), Will Wiseman, Jose-Guilherme (in million cubic meters per year) Reis, and Steve Karam (former Turkey Program Leaders) contributed in Projected Electricity Demand and Generation, 2015–2019 (gigawatt 3.6 120 the early stages. Ximena Del Carpio, Tamara Sulukhia, and Donato De Rosa hours) (current Turkey Program Leaders) accompanied the completion of the report. 4.1 Conceptualization of the Road to Good Jobs 129 Intellectual contributions were made by the rich Turkey Country Team, with members from all Global Practices (GPs) and Cross-Cutting Solutions Areas BOXES (CCSAs), and IFC in different locations across the world. Written contributions were made by (in alphabetical order) Alexios Pantelias, Alper Oguz, Ana How Does World Bank Calculate Poverty and Why Does It Differ from 1.1 22 TUIK Numbers? Maria Munoz, Arzu Uraz, Ayberk Yilmaz, Aysenur Acar, Claudia Rokx, Daniel Valderrama Gonzalez, Elif Ayhan, George Konda, Holly Brenner, Israel Osorio- Spotlight on the Syrian Refugee Crisis and the Turkish Hosting 1.2 28 Experience* Rodarte, Joao Pedro Azevedo, Kaan Inan, Kamer Karakorum-Ozdemir, Kari Nyman, Levent Yener, Lourdes Rodriguez-Chamussy, Maurizio Guadagni, 4.1 The Government of Turkey’s Reform Agenda 138 Mediha
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