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Dynamics and Drivers of Turkish Regional DYNAMICS AND DRIVERS OF TURKISH REGIONAL DEVELOPMENT: A CURATE’S EGG by AKSEL ERSOY A thesis submitted to the University of Birmingham for the degree of DOCTOR OF PHILOSOPHY School of Geography and Environmental Sciences University of Birmingham November 2011 University of Birmingham Research Archive e-theses repository This unpublished thesis/dissertation is copyright of the author and/or third parties. The intellectual property rights of the author or third parties in respect of this work are as defined by The Copyright Designs and Patents Act 1988 or as modified by any successor legislation. Any use made of information contained in this thesis/dissertation must be in accordance with that legislation and must be properly acknowledged. Further distribution or reproduction in any format is prohibited without the permission of the copyright holder. ABSTRACT Understanding of the economic processes shaping regional economies is in a constant state of change. These processes are important to understand for policy making as governments seek to improve the economic well-being of citizens. Existing empirical research in this field has focussed on regions in economically advanced and technologically innovative economies. As a consequence, the broader picture of the dynamics of regional development in less developed countries, particularly its social and political origins and the overall changes in regional inequality, have remained elusive and less clear. The purpose of this thesis has been to develop an understanding of the local and regional dynamics of economic development in the context of the transitioning and emerging economy of Turkey. The approach has been to unpack a series of local and regional development theories and, from the drivers identified, to develop an econometric model calibrated for the Turkish context using available and appropriate proxy measures. Document analysis supported by interviews with groups of policy makers has been intertwined with the results of the model. The results of the study explain that implications of the current local and regional economic development theories are a Curate’s Egg – good in parts – because these theories are only partially relevant in the Turkish context. Key words: Local and regional economic development, drivers of Turkish economy, theoretically informed empirical modelling i ACKNOWLEDGEMENTS I would like to extend my sincere thanks to Professor Michael Taylor and Professor John Bryson who provided invaluable guidance throughout the period of this research. They are the sources of many of the key ideas presented in this work. Many thanks to the staff and doctoral researchers at the School of Geography, Earth and Environmental Sciences, whose support played a part in making my life at the department less stressful. I would also like to thank my parents for encouraging me to dream and work hard. Without their kind support, this experience would not have been at all possible. Most of all, I would like to thank Zeze, my other half: she is my inspiration and the sparks that lighten my days. Thank you for your unconditional love and the sacrifices you have made to join me in this adventure to fulfil my dream. Finally, I would like to thank God for continuing to bless me much more than I could have ever imagined. ii LIST OF FIGURES Figure 1.1: Turkey’s geographical regions …………………………………… 6 Figure 1.2: Geographical position of Turkey …………………………………… 14 Figure 1.3: Structure of the thesis …………………………………………… 23 Figure 2.1: Labour productivity gaps in Turkey, 2008 …………………… 52 Figure 2.2: Unemployment rate in Turkey …………………………………… 56 Figure 2.3: Total imports, exports and trade balance, Bln US$ by year …… 57 Figure 2.4: Industry value added, 2001-2009 …………………………………… 59 Figure 2.5: Manufacturing value added, 2001-2009 …………………………… 60 Figure 2.6: 2010 Real GDP growth (%) …………………………………… 65 Figure 2.7: Annual average real GDP growth (%) forecast in OECD Countries 2011-2017 ……………………………………………… 67 Figure 3.1: Evolution of economic theories-1 …………………………… 79 Figure 3.2: Evolution of economic theories-2 …………………………… 80 Figure 3.3: Evolution of economic theories-3 …………………………… 83 Figure 3.4: Diagram of channels for “Territory T” …………………………… 94 Figure 3.5: The product cycle model (a) United States of America; (b) other advanced countries; (c) less developed countries …………………………… 100 Figure 3.6: Porter’s diamond model …………………………………………… 132 Figure 4.1: Steps to undertake an empirical model …………………………… 163 Figure 4.2: Summary of the general-to-specific approach …………………… 164 Figure 4.3: Matrix crossing types of sampling scheme by research approach …. 171 Figure 4.4: Relationship of samples …………………………………………… 173 Figure 5.1: Proportion of employment of high-tech manufacturers in Turkey …. 194 Figure 5.2: Accessibility map of Turkey …………………………………… 200 Figure 5.3: Knowledge creation and accessibility to information in Turkey …… 201 Figure 5.4: Percentage of locally owned businesses (1-49 employees) in Turkey. 209 Figure 5.5: Provinces in the Priority Development Regions …………… 216 Figure 5.6: Institutional Thickness and Institutional Support in Turkey based on Public Knowledge Creation …………………………………………………… 226 Figure 5.7: Population with tertiary education (% of 25-64 years old age) …… 230 iii Figure 5.8: The percentage of working population without degrees …………… 232 Figure 5.9: Total net profit of production of Top 500 industrial enterprises in Turkey …………………………………………………………………………… 235 Figure 5.10: Market Accessibility in Turkey …………………………………… 239 Figure 5.11: Total number of business establishments of each city in Turkey in terms of sectoral specialization (NACE 1.1), 2002 ……………………………. 243 Figure 6.1: Process of interaction between the model and the interviews ……. 250 Figure 6.2: Simple graph of a regression equation ……………………………. 255 Figure 6.3: Illustrations of (a) homoskedasticity and (b) heteroscedasticity ……. 266 Figure 6.4: Unemployment dynamics, 2004-2008 ……………………………. 270 Figure 6.5: Adana, Tunceli and Sirnak as outlier provinces ……………………. 272 Figure 6.6: Distribution of the variables in log values, with outliers ……………. 285 Figure 6.7: Outlier provinces ……………………………………………………. 286 Figure 7.1: RDAs that have been set up in Turkey ……………………………. 325 Figure 7.2: The provinces that are the headquarters of the selected RDAs ……. 326 iv LIST OF TABLES Table 1.1: Distribution and population of Turkish regions …………………… 7 Table 2.1: Evolution of Turkey’s regional policy …………………………… 35 Table 2.2: The historical order of Five Year Plans with their important characteristics …………………………………………………………… 42 Table 2.3: Growth Centres (Provinces) in Turkey …………………………… 45 Table 2.4: Turkey: Basic data …………………………………………………… 51 Table 2.5: Top industrial enterprises …………………………………………… 53 Table 2.6: Export values in million US$ (growth and shares) …………… 58 Table 2.7: Budgetary allocations (million €) under the Turkey National Programs ………………………………………………. 73 Table 3.1: Growth Centres (Provinces) in Turkey …………………………… 96 Table 3.2: Government incentives for technology oriented projects in Turkey ... 104 Table 3.3: Comparison of Çorum with different types of industrial districts …… 114 Table 3.4: Number of Specialized Industrial Zones …………………………… 116 Table 3.5: From mass production to learning region …………………………… 120 Table 3.6: Characteristics of two innovation models …………………………… 125 Table 3.7: Top 10 Companies in the “Top 500 industrial enterprises" list in 2008 …………………………………………………………………………… 140 Table 3.8: The Dimensions of Theories of Local Economic Development …… 147 Table 4.1: Structure of the interview questions …………………………… 176 Table 5.1: Growth drivers ………………………………………………. 186 Table 5.2: High-technology industries in the UK ……………………………. 189 Table 5.3: High Technology Manufactures ……………………………………. 191 Table 5.4: High Technology Manufacturing in Turkey ……………………. 193 Table 5.5: Number of Foreign Owned Companies in Turkey ……………. 207 Table 5.6: Number of local unit size group between 1-49 employees ……. 208 Table 5.7: Provinces in the Priority Development Regions ……………………. 207 Table 5.8: Example of Investment Credits ……………………………………. 219 Table 5.9: Sectoral Breakdown of Investment Incentive Certificates (January- December) ……………………………………………………………………. 221 v Table 5.10: Pearson Correlation for the institutional thickness variable (81 observations) ……………………………………………………………………. 223 Table 5.11: Component Matrix and Rotated Component Matrix of the variables . 225 Table 5.12: Percentage of working population without a primary school degree .. 231 Table 5.13: The number of top 500 enterprises in the provinces of Turkey ……. 234 Table 5.14: Total number of employment in manufacturing and construction sectors ……………………………………………………………………. 238 Table 5.15: Total number of business establishments of each city in Turkey in terms of sectoral specialization (NACE 1.1) ……………………………………. 242 Table 6.1: Growth drivers with their descriptions ……………………………. 258 Table 6.2: Summary table for the addition of an irrelevant variable ……………. 262 Table 6.3: Summary table for the omission of a relevant variable ……………. 264 Table 6.4: Correlation coefficients of the dependent variables between 2004 and 2008 ……………………………………………………………………………. 270 Table 6.5: Unemployment statistics, 2004-2008 ……………………………. 271 Table 6.6: Model has been run without controlling the variables (81 observations) ……………………………………………………………. 273 Table 6.7: Index values of the extent and nature of local demand (MKTACC) variable ……………………………………………………………………. 274 Table 6.8: The total net profit of production (x106
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