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Journal ArticleDOI

Patterns of Productivity Growth and the Wage Cycle in Turkish Manufacturing

01 Oct 2001-International Review of Applied Economics (Taylor & Francis Group)-Vol. 15, Iss: 4, pp 375-396

AbstractIn this paper we investigate the distributional consequences of the post-1980 accumulation patterns and technological change in the Turkish manufacturing industries. We utilise two quantitative techniques. First, we make use of the Hodrick-Prescott filter to disintegrate the cyclical variations in productivity growth and wage rates from their respective historical trends, and study the evolution of the wage cycle against the long term productivity patterns in the sector. Next, we decompose the fundamental characteristics of the contributions of productivity growth of the manufacturing sub-sectors to the overall total. Our results suggest very little structural change in the sectoral composition and nature of productivity advances under the post-1980 structural adjustment reforms and outward-orientation, and underscore that the gains in productivity in this period did not materialise as gains in remunerations of wage labour. Contrary to the prognostications of the orthodox theory, the post-1980 export orie...

Topics: Productivity (62%), Total factor productivity (61%), Multifactor productivity (60%), Wage (59%), Wage labour (50%)

Summary (2 min read)

1. Introduction

  • In this paper the authors investigate the distributional consequences of the post-1980 accumulation patterns and technological change in Turkish manufacturing industries.
  • The period under analysis is known to span the overall transformation of the Turkish economy from domestic demand-oriented import-substitutionist industrialisation to one with export-orientation and integration with the global commodity and financial markets.
  • To this end, the authors employ two quantitative techniques: first, they follow on the advances of the recent business-cycle literature and decompose the variations in labour productivity and the real wage rate to obtain their long term underlying trends for the period 1950 ± 96.

2. Phases of Macroeconomic Adjustment in Turkey

  • Overall, it is seen that the Turkish economy has experienced three distinct cycles of growth-crisis-and-adjustment during the last three decades.
  • Accordingly, private industrial profits were supported from two sources.
  • In fact, as gross fixed investments of the private sector increased by 14.1% during 1983 ± 87, only a small portion of this amount was directed to manufacturing.
  • Together with this contraction, the post-1994 crisis management gave rise to significant shifts in income distribution, and real wages in manufacturing declined by 36.3% (Table 1, row 18, column 7).
  • While the import substitutionist (1972± 76) legacy was based on the protectionist rents of a closed economy with an overvalued exchange rate, the export orientation phase (1980 ± 88) was driven by commodity trade liberalisation and real depreciation under conditions of wage suppression.

4. Decomposition Analysis

  • Now the authors turn their attention to a direct comparison of the labour productivity and employment patterns across two distinct phases: 1969 ± 76 versus post-1980.
  • The authors task here is to reveal whether the post-1980 period has actually brought a structural-technological change for the Turkish manufacturing industry with positive effects on employment trends and the accumulation patterns of the aggregate economy at large.
  • As the second term of equation (4) represents the effect of sectoral employment reallocation on overall productivity change, the transfer of labour from a sector with a low output/labour ratio to a sector that admits high-productivity will have a positive contribution to total productivity.
  • The most important feature of these sectors is their small output and employment shares.

5. Concluding Comments

  • The authors investigated the distributional impact of the post-1970 accumulation patterns and technological change in the Turkish manufacturing industries.
  • In the words of Pamukcu & Boer (1999, p. 21), (̀all of these) point to the possible existence of a process of ª growth without transformationº occurring in Turkey, and this is certainly not what has been expected by ending the industrialization strategy based on (domestic demandoriented) import-substitution which prevailed since the early sixties’ .
  • See SIS Manufacturing Annual Industry Surveys.
  • Wage earnings include all payments in the form of wages and salaries and per diems, gross income tax, social security, and pension fund premiums.

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International Review of Applied Economics
ISSN: 0269-2171 (Print) 1465-3486 (Online) Journal homepage: http://www.tandfonline.com/loi/cira20
Patterns of Productivity Growth and the Wage
Cycle in Turkish Manufacturing
Ebru Voyvoda & A. Erinc Yeldan
To cite this article: Ebru Voyvoda & A. Erinc Yeldan (2001) Patterns of Productivity Growth
and the Wage Cycle in Turkish Manufacturing, International Review of Applied Economics, 15:4,
375-396, DOI: 10.1080/02692170110081921
To link to this article: http://dx.doi.org/10.1080/02692170110081921
Published online: 21 Jul 2010.
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ISSN 0269-2171 print/ISSN 1465-3486 online/01/040375-22 2001 Taylor & Francis Ltd
DOI: 10.1080/02692170110081921
International Review of Applied Economics, Vol. 15, No. 4, 2001
Ebru Voyvoda & A. Erin Yeldan, Department of Economics, Bilkent University, 06533 Ankara, Turkey.
E-mails: voyvoda@bilkent.edu.tr, yeldane@bilkent.edu.tr
Patterns of Productivity Growth and the Wage Cycle
in Turkish Manufacturing
EBRU
VOYVODA
&
A.
ERIN
YELDAN
ABSTRACT
In this paper we investigate the distributional consequences of the post-1980
accumulation patterns and technological change in the Turkish manufacturing industries.
We utilise two quantitative techniques. First, we make use of the Hodrick
±
Prescott filter to
disintegrate the cyclical variations in productivity growth and wage rates from their
respective historical trends, and study the evolution of the wage cycle against the long term
productivity patterns in the sector. Next, we decompose the fundamental characteristics of
the contributions of productivity growth of the manufacturing sub-sectors to the overall
total. Our results suggest very little structural change in the sectoral composition and nature
of productivity advances under the post-1980 structural adjustment reforms and outward-
orientation, and underscore that the gains in productivity in this period did not materialise
as gains in remunerations of wage labour. Contrary to the prognostications of the orthodox
theory, the post-1980 export orientation of Turkish manufacturing was not found to lend
itself to productivity contributions, and could not be sustained as a viable strategy of
`export-led industrialisation’.
1. Introduction
In
this
paper
we
investigate
the
distributional
consequences
of
the
post-1980
accumulation
patterns
and
technological
change
in
Turkish
manufacturing
indus-
tries.
The
period
under
analysis
is
known
to
span
the
overall
transformation
of
the
Turkish
economy
from
domestic
demand-oriented
import-substitutionist
indus-
trialisation
to
one
with
export-orientation
and
integration
with
the
global
commodity
and
financial
markets.
During
this
period,
the
manufacturing
industry
has
evolved
as
the
main
sector
in
both
leading
the
export-orientation
of
the
economy,
and
also
as
a
focal
sector
wherein
the
distribution
patterns
between
wage-
labour
and
capital
have
been
re-shaped.
Existing
independent
studies
1
and
rudimentary
data
from
official
agencies
suggest
anecdotal
evidence
that
one
of
the
major
structural
deficiencies
of
the
sector
reveals
itself
in
the
rather
loose
association
between
the
gains
in
labour
productivity
on
the
one
hand,
and
the
dismal
patterns
of
employment,
accumulation,
and
of
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376
E. Voyvoda & A. E. Yeldan
remunerations
of
wage
labour,
on
the
other.
This
deformation
is,
in
fact,
observed
to
be
a
perennial
feature
of
the
post-1980
structural
adjustment
era.
Indeed,
data
from
the
State
Institute
of
Statistics
(
SIS
)
suggest
that
while
the
average
real
value
added
per
worker
employed
has
increased
by
160%
between
1980
±
96,
real
wage
earnings
barely
reach
the
1980
level
as
of
1996.
2
Furthermore,
formal
labour
employment
has
increased
by
only
31.8%
over
the
same
period,
leading
many
independent
researchers
to
characterise
the
overall
performance
of
the
sector
as
an
`enigma’
(
see,
for
example,
Yeldan
&
KÈose,
1999;
Ercan,
1999;
YentÈurk,
1997;
Kepenek,
1996;
,
Senses,
1996;
and
Maraslioglu
&
Tiktik,
1991
)
.
What
was
theoretically
expected
from
the
process
of
outward
orientation,
however,
was
that
as
the
sector
was
exposed
to
more
competition
and
technological
know-how
in
the
global
markets,
rapid
gains
in
productivity
would
be
converted
into
gains
in
both
wage
earnings
and
employment.
Consequently,
the
manufactur-
ing
industry
would
also
serve
as
the
engine
of
growth
for
the
rest
of
the
economy.
Yet
the
fact
that
this
expectation
did
not
materialise
throughout
the
decade
has
also
precipitated
the
political
conditions
leading
to
the
demise
of
the
manufacturing
export-led
growth
strategy
by
1989.
It
is
the
purpose
of
this
paper
to
analytically
depict
and
decompose
the
fundamental
characteristics
of
accumulation,
technological
change
and
distribution
in
the
Turkish
manufacturing
sector.
To
this
end,
we
employ
two
quantitative
techniques:
first,
we
follow
on
the
advances
of
the
recent
business-cycle
literature
and
decompose
the
variations
in
labour
productivity
and
the
real
wage
rate
to
obtain
their
long
term
underlying
trends
for
the
period
1950
±
96.
Here,
we
make
use
of
the
so-called
Hodrick
±
Prescott
(
1997
)
filter
to
disintegrate
the
cyclical
variations
in
productivity
growth
and
wage
rates
from
their
respective
historical
trends.
This
exercise
enables
us
to
isolate
the
underlying
trend
paths
of
the
two
series,
and
to
make
inferences
about
the
evolution
of
the
wage
cycle
against
the
long
term
productivity
patterns
in
Turkish
manufacturing.
Then,
on
a
second
level
of
analysis,
we
aim
at
a
more
detailed
decomposition
exercise
on
the
nature
and
sources
of
productivity
growth
within
the
sub-sectors
of
the
manufacturing
industry.
Here,
we
build
upon
the
now
seminal
works
of
Syrquin
(
1986
)
,
Chenery
et al.
(
1986
)
and
one
of
its
recent
applications
due
to
Pieper
(
1998
)
,
and
decompose
the
contributions
of
productivity
growth
of
the
manufacturing
sub-sectors
to
the
overall
total.
In
so
doing,
we
categorise
the
sectors
as
`leaders’
versus
`followers’
given
the
extent
and
nature
of
their
contributions
to
overall
labour
productivity
growth
in
aggregate
manufacturing.
Our
results
suggest
very
little,
if
any,
structural
change
in
the
sectoral
composition
and
nature
of
productivity
advances
under
the
post-1980
structural
adjustment
reforms
and
outward-orientation
of
the
economy,
and
underscore
that
the
rapid
gains
in
productivity
in
this
period
did
not
materialise
as
gains
in
remunerations
of
wage
labour.
The
paper
is
organised
in
four
parts.
In
the
next
section
we
present
an
overview
of
the
growth-crisis
and
the
post-crisis
adjustment
cycles
of
the
Turkish
economy
from
the
viewpoints
of
accumulation,
productivity
and
distribution.
In
Section
3
we
study
the
historical
trends
of
labour
productivity
and
real
wage
movements
using
filtering
techniques.
We
investigate
the
nature
of
such
productivity
gains
in
aggregate
manufacturing
by
decomposing
its
sources
into
its
sub-sectors
in
Section
4.
With
this
approach
we
make
comparisons
between
the
patterns
of
productivity
of
the
import
substitutionist
phase
of
the
1970s
versus
the
outward
orientation
and
financial
liberalisation
of
the
1980s
and
1990s.
Finally,
Section
5
summarises
and
concludes.
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Patterns of Productivity Growth
377
2. Phases of Macroeconomic Adjustment in Turkey
We
provide
a
general
overview
of
the
recent
macroeconomic
history
of
Turkey
in
Table
1.
Overall,
it
is
seen
that
the
Turkish
economy
has
experienced
three
distinct
cycles
of
growth-crisis-and-adjustment
during
the
last
three
decades.
The
first
covers
broadly
the
period
1972
±
79,
with
its
main
attribute
being
the
deepening
of
the
import
substitutionist
industrialisation
strategy.
This
period,
often
called
the
second phase
of
import
substitution,
is
characterised
by
the
implementation
of
a
vigorous
public
investment
programme
that
is
aimed
at
expanding
the
domestic
production
capacity
in
heavy
manufacturing
and
capital
goods,
such
as
machinery,
petrochemicals,
and
basic
intermediates.
The
foreign
trade
regime
was
under
heavy
protection
via
quantitative
restrictions,
along
with
a
fixed
exchange
rate
regime
which,
on
average,
was
overvalued
given
purchasing
parity
terms.
The
state
was
both
an
investing
and
a
producing
agent
with
state
economic
enterprises
(
SEEs
)
serving
as
the
major
tools
for
fostering
the
industrialisation
targets.
During
1927
±
79,
the
underlying
political
economy
basis
of
the
ISI
strategy
was
one
of
a
grand,
yet
delicate,
alliance
between
the
bureaucratic
elites,
industrial
capitalists,
industrial
workers,
and
the
peasantry
(
Boratav,
1983;
Boratav
et al.
1984
)
.
Accordingly,
private
industrial
profits
were
supported
from
two
sources.
First,
the
protectionist
trade
regime,
often
implemented
through
strong
non-tariff
barriers,
enabled
industrialists
to
capture
oligopolistic
profits
and
rents
originating
from
a
readily
available,
protected
domestic
market.
Second,
the
existence
of
a
public
enterprise
system
with
the
strategic
role
of
producing
cheap
intermediates
through
artificially
low,
administered
prices
enabled
the
private
industrial
enter-
prises
(
and
the
rural
economy
)
to
minimise
material
input
costs.
Industrialists,
in
turn,
have
`accepted
the
conditions
of
a
general
rise
in
manufacturing
wages,
and
an
agricultural
support
programme,
which
induced
the
domestic
terms
of
trade
to
favour
agriculture.
The
import
substitutionist
development
strategy
was
observed
to
reach
its
limits
beginning
in
1976
when
the
financing
of
the
balance
of
payments
and
industrial
investments
became
increasingly
difficult.
The
foreign
exchange
crisis
of
1977
±
80
brought
together
the
cessation
of
the
civilian
democracy
and
imposition
of
a
new
constitution
and
labour
codes
regulating
the
industrial
relations
under
a
military
regime.
Growth
was
re-invigorated
following
the
introduction
of
a
structural
adjust-
ment
programme
in
January
1980,
under
the
auspices
of
the
international
centres
such
as
the
World
Bank
and
the
IMF.
The
period
1981
±
87
was
marked
with
commodity
trade
liberalisation
and
export
promotion
along
with
a
price
reform
aimed
at
reducing
the
states
role
in
the
economic
affairs.
The
existing
system
of
fixed
exchange
rate
administration
was
replaced
by
a
flexible
regime
of
crawling-peg
and,
together
with
the
introduction
of
a
complex
system
of
direct
export
subsidisation,
acted
as
the
main
instrument
for
the
promotion
of
exports
and
pursuit
of
macroeconomic
stability.
3
During
the
period
1983
±
87,
export
revenues
increased
at
an
annual
rate
of
10.8%
and
gross
domestic
product
rose
at
an
annual
rate
of
6.5%.
The
period
was
also
characterised
by
severe
erosion
of
wage
incomes
via
hostile
measures
against
organised
labour.
The
suppression
of
wages
was
instrumental
both
in
lowering
production
costs
and
also
in
the
squeezing
of
the
domestic
absorption
capacity.
The
share
of
wage-labour
in
manufacturing
value
added
receded
from
its
average
of
35.6%
in
1977
±
80,
to
20.6%
in
1988
(
Table
1,
row
19,
columns
2
and
5
)
.
In
this
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378
E. Voyvoda & A. E. Yeldan
Table 1. Phase s of macroeconomic adjustment i n Turkey, 1972
±
99
Import-
Substitutionist
Industrialisation
1972
±
76
Economic
crisis
1977
±
80
Post-crisis
adjustment
1981
±
82
Export-led
growth
1983
±
87
Exhaustion
1988
Unregulated
financial
liberalisation
1989
±
93
Financial
crisis
19934
Reinvigoration
of short-term
foreign
capital-led
growth
1995
±
97
Contagion of the
World financial
crisis
1998 1999
I. Production and accumulation
(
Real rate of growth, %
)
1 GDP 6.8 0.5 4.2 6.5 2.1 4.8
±
5.5 7.2 3.1
±
5.0
2 Agriculture 1.8 0-.5 0.6 0.8 7.8
±
0.7 1.3 8.4
±
4.6
3 Manufa cturing 9.7
±
-0.2 7.9 8.6 1.6 6.0
±
7.6 10.2 1.23
±
5.7
Fixed Investment
4 Private Sector 11.5
±
7.3
±
1.0 14.1 29.2 11.9
±
9.6 9.5
±
4.2
±
11.0
5 Private Energy an d
Transpor t 19.5
±
10.6 27.3 7.5 4.2 16.2 -26.2 25.8
±
14.3
±
23.8
6 Private
Manufacturing 10.9
±
13.6 4.8 7.7 9.7 14.3
±
0.5 4.7
±
6.3
±
19.7
7 Private Housing 9.0 2.2
±
19.6 24.5 50.7 11.2
±
24.6 2.9
±
1.6 0.4
8 Public Sector 15.4
±
1.7 4.8 12.0
±
2.3 5.2
±
39.5 15.8 4.6 7.4
9 Public Energy and
Transpor t 16.3 0.3 9.5 16.8
±
2.6 4.4
±
44.6 13.6 14.6 0.1
10 Public
Manufacturing 16.0 1.3
±
11.2
±
9.6
±
11.3
±
6.9
±
41.4 7.8 17.1 3.4
11 Manufacturing
Sector
(
Total
)
12.0
±
9.4
±
0.8 3.7 6.6 12.4
±
2.5 4.8
±
5.6
±
17.6
As & Share of
GNP:
12 S avings 20.9 17.3 17.7 19.5 27.2 21.9 23.0 21.1 23.1 19.8
13 Investment 21.3 22.3 18.3 20.9 26.1 23.7 24.4 24.8 24.3 23.8
14 PSBR 5.7
a
6.9 3.7 4.7 4.8 9.1 7.9 7.2 9.2 14.3
Downloaded by [Bilkent University] at 23:54 12 November 2017

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References
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01 Jan 1997

5,882 citations


"Patterns of Productivity Growth and..." refers background in this paper

  • ...See, for example, Hodrick & Prescott (1997) and Kydland & Prescott (1990)....

    [...]


Journal ArticleDOI
Abstract: A study documents some features of aggregate economic fluctuations sometimes referred to as business cycles. The investigation uses quarterly data from the postwar US economy. The fluctuations studied are those that are too rapid to be accounted for by slowly changing demographic and technological factors and changes in the stocks of capital that produce secular growth in output per capita. The study proposes a procedure for representing a times series as the sum of a smoothly varying trend component and a cyclical component. The nature of the comovements of the cyclical components of a variety of macroeconomic time series is documented. It is found that these comovements are very different than the corresponding comovements of the slowly varying trend components.

5,676 citations


Journal ArticleDOI
Abstract: This paper argues that the reporting of facts in light of theory fosters the development of theory Dynamic neoclassical macro theory guided the selection of facts to report The hope is that these facts will foster the further development of this theory A finding is that the price level is countercyclical in the post-Korean War period This finding debunks the myths that the price level is procyclical, with the postwar period being no exception

878 citations


"Patterns of Productivity Growth and..." refers background in this paper

  • ...See, for example, Hodrick & Prescott (1997) and Kydland & Prescott (1990)....

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Book
01 Jan 1986
Abstract: The relation between industrialization and economic growth is a subject of continuing controversy. Historically, the rise in the share of manufacturing in output and employment as per capita income increases, and the corresponding decline of agriculture, are among the best documented generalizations about development. But how does this transformation of the structure of production affect the rate of growth and the distribution of its benefits? And what has been the effect of policies designed to accelerate this shift or to alter its composition? These and related questions are still in dispute. This book attempts to clarify the role of industrialization in development by conducting a series of comparative studies of semi-industrial economies. The studies address three main topics: industrialization as a stage in the overall transformation that constitutes modern economic growth; the similarities and differences in the experiences of nine industrializing economies; and the relation between rising productivity and structural change. This chapter traces the background of the principal issues to be considered; summarizes the studies' main findings; and gives the reader a guide to the countries chosen, the topics discussed, and the analytical techniques employed.

596 citations


"Patterns of Productivity Growth and..." refers methods in this paper

  • ...Here, we build upon the now seminal works of Syrquin (1986), Chenery et al. (1986) and one of its recent applications due to Pieper (1998), and decompose the contributions of productivity growth of the manufacturing sub-sectors to the overall total....

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Frequently Asked Questions (1)
Q1. What are the contributions in "Patterns of productivity growth and the wage cycle in turkish manufacturing" ?

In this paper the authors investigate the distributional consequences of the post-1980 accumulation patterns and technological change in the Turkish manufacturing industries. First, the authors make use of the Hodrick± Prescott filter to disintegrate the cyclical variations in productivity growth and wage rates from their respective historical trends, and study the evolution of the wage cycle against the long term productivity patterns in the sector. Their results suggest very little structural change in the sectoral composition and nature of productivity advances under the post-1980 structural adjustment reforms and outwardorientation, and underscore that the gains in productivity in this period did not materialise as gains in remunerations of wage labour.