WORKING PAPER NO: 14/08
GDP Growth in Turkey:
Inclusive or Not?
April 2014
Temel TAŞKIN
© Central Bank of the Republic of Turkey 2014
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Central Bank of the Republic of Turkey
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author(s) and do not necessarily represent the official views of the
Central Bank of the Republic of Turkey. The Working Paper Series
are externally refereed. The refereeing process is managed by the
Research and Monetary Policy Department.
GDP Growth in Turkey: Inclusive or not? 1
Temel Taskin2
Central Bank of Turkey
April, 2014
Abstract
In this paper, we discover the inclusiveness of GDP growth in Turkey over the course of the last
decade. In doing so, we use a recently developed method a la Anand et al. (2013) which
integrates efficiency and equity dimensions of economic growth in a single measure. We find
that Turkish GDP growth was - on average - inclusive between 2002 and 2011. We also
investigate cross-region and over-time developments for the available data period, and
document significant heterogeneity in inclusiveness of economic growth across these
dimensions. Moreover, the regional analysis based on 2006-2011 period reflects an efficiencyequity tradeoff in Turkey’s economic growth.
JEL Classification: D63, O47, R11.
Keywords: Turkey, inclusive growth, regional growth, income distribution, per capita income.
1
I would like to thank Rauf Gönenç for fruitful discussions. The views expressed here solely belong to the author
and does not reflect those of the Central Bank of Turkey.
2
Email: [email protected] URL: http://www.temeltaskin.com/
1
1. Introduction
In this paper we investigate the inclusiveness of GDP growth in Turkey between 2002 and 2011
using a recently developed method a la Anand et al. (2013) which decomposes growth into
efficiency and equity dimensions. 3 The empirical results suggest that Turkish GDP grew
inclusively - on average – between 2002 and 2011. A focus on the time dimension reveals
sizable distortion in inclusiveness of growth during the Great Recession period. Moreover, we
find substantial heterogeneity in inclusiveness across regional growth figures, which also reflect
an efficiency-equity tradeoff in Turkish GDP growth.
The method we use (Anand et al. 2013) is based on a utilitarian social welfare function in which
inclusiveness depends on income growth and distribution. It decomposes growth into efficiency
and equity dimensions. Hence it allows separating the contributions of per capita income and
distributional developments to inclusiveness of growth, and reflects the pro-poor economic
growth as well.4
Adverse distributional consequences of Great Recession stimulated the discussion of inclusive
growth recently in both academic and policy circles.5 We contribute to this discussion by
investigating the inclusiveness of economic growth in Turkey over the course of the last decade
which contains the Great Recession as well as a strong growth period before and after the
crisis. Although there is no unique definition of inclusive growth in the literature, one can
briefly describe it as a model of growth in which benefits and opportunities derived from
economic growth are distributed equitably across different parts of society. So, there are two
main components of the concept of inclusive growth; first there should be improvement,
second the benefits of this improvement should be broad-based. These two dimensions of the
concept of inclusive growth are captured in the formulation we use (Anand et al. 2013) and
named with “efficiency” and “equity” terms, respectively.
3
We focus on the period between 2002 and 2011 due to data limitation.
See Kraay (2004) and Ravallion and Chen (2003) for a detailed discussion on pro-poor growth.
5
SeeWorld Bank (2009), De Mello and Dutz (2012), Ianchovichina and Lundstrom (2012), http://www.ipc-undp.org
and http://www.oecd.org/inclusive-growth.
4
2
0,15
1200
Turkish GDP (PPP-constant USD) and
Unemployment
1000
0,1
Billions
Figure 1. Source: TURKSTAT and OECD.
800
0,05
600
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
-0,05
400
200
GDP-growth
Unemployment rate
-0,1
GDP-level (right axis)
0
Turkey grew by 5.1% per year on average between 2002 and 2011. Reflections of this economic
growth varied over time. In particular, between 2002 and 2007, average annual growth rate
was 6.9%, however unemployment rate stayed relatively flat. Therefore it spurred a discussion
of jobless and non-inclusive growth for that period. On the other hand, during the recovery
period after Great Recession, economic growth came along with a sharp decline in
unemployment, which is supposed to be reflected in better distributional consequences (Figure
1). Motivated by these discussions, we elaborate on the GDP growth of Turkey over the last
decade and document the inclusiveness developments using a recent measure (Anand et al.
2013).
Calculations based on 2002-2011 period shows that inclusiveness of Turkish GDP growth
improved by 5.8% per year on average. Increase in per capita income contributed roughly two
thirds of this improvement, and distributional developments (equity) contributed the rest of
the progress in inclusiveness. When we exclude the period of Great Recession (2008-2009),
inclusiveness progress turns out to be 9.1% per year on average. Urban versus rural area
comparison returns that during 2006-2011 (available period), urban area improved equity
better than rural area, whereas rural area outperformed in terms of per capita income growth.
3
We observe significant heterogeneity when we elaborate on regional developments between
2006 and 2011. In terms of aggregate inclusiveness progress, Mediterranean region performed
best with an average annual inclusiveness growth rate of roughly 7%. It is followed by West
Black Sea and Southeast Anatolia with 6% average annual improvement in inclusiveness
measure. East Marmara, Central Anatolia, and East Black Sea improved inclusiveness at an
average annual rate of .5-1.5% which is the lowest rate of improvement among the regions. The
rest of the regions improved between 2-4.5% per year. We also check whether this
heterogeneity is related with developments in the vulnerable groups in Turkish labor market. In
particular, we show that increase in non-agricultural low-skilled employment rate and nonagricultural female employment rate are positively correlated with the improvement in
inclusiveness during the period of 2006-2011.
We elaborate more on the heterogeneity in inclusiveness by decomposing into per capita
income and equity dimensions, which reflects an efficiency-equity tradeoff during the period of
2006-2011 for the twelve regions of Turkey. In other words, a better performance in per capita
income improvement is, on average, associated with a worse performance in equity
improvement, especially in the medium term.
We also calculate the size of deterioration in inclusiveness for the twelve regions during the
Great Recession, and observe substantial heterogeneity. During 2008-2009, the inclusiveness is
deteriorated most for Northeast Anatolia (20%). The least affected region is Mediterranean in
which per capita income is decreased and equity is increased, and in aggregate terms
inclusiveness is slightly improved (1%). Inclusiveness deteriorated between 3-15% per year in
the rest of the regions during the Great Recession. Moreover, the most affected (measured as
percentage decrease in per capita income) income deciles were the lowest earning ones during
the corresponding period.
While the focus of this paper is on the particular case of Turkey, the intersection of growth and
inequality literatures which also motivated the term inclusive growth paid attention on a broad
set of questions. For instance, a number of studies including Ali and Son (2007), Kakwani and
4
Pernia (2000), and Ravaillon and Chen (2003) developed methods for measuring inclusive,
equitable or pro-poor growth.
A number of studies searched for the optimal policies to promote an equitable distribution of
benefits and opportunities accrued from economic growth. For instance, Christiaensen et al.
(2002) provide evidence on the interaction between various policies and poverty reduction
using an African cross-country dataset. Klasen (2003, 2005) discuss policy options to achieve
equitable growth. Immervoll and Richardson (2011) document evidence on redistribution
policies and their effects on inequality in OECD countries. Some papers in the literature focused
attention on the tradeoff between growth and inequality using cross country data (Forbes
2000, Banerjee and Duflo 2003, Deininger and Squire 1998, Li and Zou 1998, Barro 2000),
whereas others investigated the particular cases of different countries in terms of the evolution
of growth and inequality (Datt and Ravallion 2002, McCulloch et al. 2000, Goh et al. 2009). Our
paper aims to contribute to this strand of the empirical literature on economic growth by
studying the case of Turkey.
Rest of the paper is organized as follows: we introduce the method of inclusiveness
measurement in section 2, we present the dataset in section 3, we discuss the empirical results
in section 4, and we conclude in section 5.
2. Measuring inclusiveness
In this section we elaborate on the method of inclusiveness measurement developed by Anand
et al. (2013).6 Their idea of inclusiveness measurement is based on generalized concentration
curves, which is constructed from social mobility curves.7 A social mobility curve is defined as:
{ }
6
The welfare measure used in this paper purely based on the level and distribution of income which might lead to
certain caveats. See OECD (2014) for a detailed discussion of various social welfare measures.
7
See Kakwani (1980), Ali and Son (2007) for details of concentration curves, and Anand et al. (2013) for social
mobility curves.
5
where numbers 1 to n represent poorest to the richest people in the population. A generalized
concentration curve is defined as a cumulative distribution of a social mobility curve as follows:
{̅ }
where we define:
̅
∑
The arguments ( ) of generalized concentration curve (
the bottom ‘i’ percent of population, therefore
) represent the average income of
represents average income in the
population. Here, the index ‘i’ does not have to be percentiles; it can represent quintiles,
quartiles, or another grid depending on data availability. Finer grids increase accuracy of
measurement.
Shown in Figure 2 are various generalized concentration curves. They can be considered as
shifted versions of each other. Now we are going to elaborate more on these curves to
understand the inclusiveness implications of these types of shifts in generalized concentration
curves. Let’s assume a continuous hypothetical generalized concentration curve as AB in Figure
2, and denote the area under the curve as:
̅
Note that when the relationship between
∫ ̅
and
determines equity dimension of income
distribution in the population. By definition, the maximum value for
can be equal to . In
this case, everybody in the population would have the same income, and the distribution would
be maximum equitable. In the other extreme, where the ratio converges to 0, the income is
concentrated in the higher income groups. Hence, the distribution gets less equitable in this
case. Thus, the ratio of
to
represents the equity dimension of the generalized
6
concentration curve of the population. Ali and Son (2007) describe it as income equity index
(IEI):
̅
̅
One can rearrange and differentiate the above equation as follows:
̅
̅
̅
̅
̅
̅
̅
̅ ̅
Using the equation above, one can calculate the change in inclusiveness of a generalized
concentration curve when it shifts. The formulation also allows for decomposition in terms of
equity (distribution,
) and efficiency (per capita GDP, ). The relationship between the value
of changes in
, and inclusiveness can be summarized as follows: first, if change in both
and
and
are positive, then the movement is certainly inclusive. If
increases and
decreases,
higher per capita income is reached at the cost of higher inequality. Whether it is an inclusive
movement or not depends on the relative change in the two dimensions. If
increases and
decreases, higher equality is reached at the cost of lower per capita income. Inclusiveness of
this type of a movement again depends on the relative change in the two dimensions. If both
and
decrease, then the movement is certainly non-inclusive. Figure 2 illustrates each case
with examples.
7
Figure 2. Concentration Curve and Inclusiveness (Source: Anand et al. 2013)
We would like to elaborate on the concentration curves by giving a numeric illustration. Let
and
represent two generalized concentration curves at time ‘t’ and ‘t+1’. Following the definitions,
we calculate ,
,
and
as:
,
From time ‘t’ to time ‘t+1’, change in
,
,
is 69% and change in
,
is 57%. Both dimensions
contribute positively to the inclusiveness of the income distribution in population. Therefore
the movement in our example illustrates the one from AB to A1B1 in Figure 2. Total change in
inclusiveness can be calculated either as a simple summation of the two or one can assign
different weights to the two in order to reflect preferences over efficiency and equity.
8
3. Data
We obtain income distribution data from Turkish Statistics Institute (TURKSTAT).8 It is provided
in current Turkish Lira prices. If it was provided in an internationally comparable (PPP-adjusted)
or real (CPI-adjusted) terms, then this data set would be sufficient to execute the empirical
exercises in this paper. However, the income distribution data is provided in current prices
denominated in Turkish Lira (TL). Using current prices measured in TL would overestimate the
per capita income growth rates, which is a determinant of inclusive growth. Therefore, we
process the income distribution data provided by TURKSTAT by using PPP-adjusted per capita
GDP data obtained from Organization for Economic Cooperation and Development
(OECD).9Specifically, what we do is as follows: we rescale the income distribution data for each
year so that the income per capita in the TURKSTAT data is equal to the PPP-adjusted GDP per
capita in constant US dollars.
Our process over the raw data does not affect the distribution but the levels. So, the income
distribution does not change but per capita income levels in each decile group change. In other
words, the ratio of income levels of the decile groups are the same with that of the raw data
series. However, their levels, therefore growth rates over the time series alter after adjusting
with PPP.
The regional analysis relies on the data obtained from TURKSTAT as well. However, we do not
have regional per capita GDP data measured in PPP adjusted constant prices. Therefore we
rescaled the regional data with the PPP factors that we used for aggregate (country level) data.
Consequently, we obtained both aggregate and regional income distribution data measured in
PPP-adjusted constant US dollars.
8
9
Income Distribution and Living Conditions Survey.
We use constant prices, constant PPPs, US dollars.See http://stats.oecd.org for PPP data.
9
4. Results
4.1 Aggregate economy
First we present the results regarding the aggregate Turkish economy for the period between
2002 and 2011. Here, we merge two datasets obtained from two separate surveys. The first
one covers the period between 2002 and 2005; the other one covers 2006 to 2011. 10 When we
present the progress between 2002 and 2011, we will take this fact into account and skip the
progress between 2005 and 2006 (the years in which the two surveys breakdown) in order to
avoid a possible inconsistency.
Figure 4 shows the average income of each decile in Turkey between 2002 and 2011. In general,
average income of each decile increased between 2002 and 2011, however there is a
temporary decrease which corresponds to the Great Recession (2008-2009) period.
We draw the generalized concentration curves of Turkey for 2002 and 2011 in order to get an
illustration of the progress in inclusiveness. As shown in Figure 5, the 2011 curve is shifted
above 2002 curve, so average income of each income decile increased between 2002 and 2011.
This is a positive contribution to inclusive growth. However, it does not cover the entire
concept of inclusiveness. Formally, we need to calculate the change in equity ( ) and per
capita income ( ) together in order to obtain the change in aggregate measure of inclusiveness.
Figure 6 depicts the progress in inclusive growth between 2002 and 2011. It decomposes the
inclusiveness into per capita income and equity dimensions. In 2003, 2004, and 2005 both per
capita income and equity components contributed positively to the inclusive growth. On
average, per capita income ( ) grew by 6.3% per year and equity measure ( ) is improved by
3.2% per year between 2002 and 2005. Therefore, per capita income contributed roughly twice
as much as equity to the inclusive growth in this period.
10
Household Budget Survey for 2002-2005 and Income Distribution and Living Conditions Survey for 2006-2011.
10
45
22
40
35
17
12
7
2
2002
2003
2004
2005
2006
2007
2008
2009
2010
1st
Thousands
Thousands
Figure 4. Evolution of Income Deciles: Turkey (PPP-adjusted US dollars)
2nd
3rd
30
4th
25
5th
20
6th
15
7th
10
8th
5
9th
0
Ybar
2011
Thousands
Figure 5. Generalized Concentration Curves: Turkey (PPP-adjusted US dollars)
14
200
2
12
10
8
6
4
2
y1
y2
y3
y4
y5
y6
y7
y8
y9
y10
When we focus on the period between 2007 and 2011, which also contains the Great Recession
period (2008-2009), we see a more heterogeneous picture. In 2007,
and
contributed
positively to inclusiveness, whereas in 2008 and 2009 we observe the opposite. In 2010, per
capita income improved, however equity is regressed. In 2011, both components improved
again. Between 2007 and 2011, on average, per capita income increased by 2.4% per year and
equity improved by 1.1% per year.
11
Figure 6. Change in inclusiveness: Turkey
0,15
Ybar
Omega
0,1
0,05
0
2003
2004
2005
2007
2008
2009
2010
2011 Average
-0,05
-0,1
-0,15
During the entire period of 2002-2011,
increased by 3.9% per year and
increased by 1.9%
per year. Hence, the contribution of improvement in per capita income has been twice as much
as that of equity to the inclusiveness of economic growth in Turkey over the course of the last
decade. As a result, the aggregate inclusive growth measure improved by 5.8% per year during
the corresponding period. When we exclude the Great Recession, the average improvement
turns to be 9.1% per year.
Some heterogeneity between urban and rural areas
As a first attempt to see whether the improvement in inclusiveness is dispersed among
different areas of the country, we present the results for urban and rural areas for the period
between 2006 and 2011 (due to data availability). 11 Figure 7 depicts the generalized
concentration curves of urban areas and rural areas in Turkey for 2006 and 2011. In general,
average income of each decile increased for both areas. At the first glance, the gap between
11
Recall that we merged two datasets (Household Budget Survey and Income Distribution and Living Conditions
Survey) for the aggregate economy. However, the urban and rural differentiation is available only in the second
dataset which is available after 2006.
12
the two curves seems to be widening towards higher deciles in the rural area. That points out a
less progressive equity improvement in the rural area relative to the urban area. This is going to
be clearer when we present the numbers for
and
.
16
14
12
(a) Urban
2006
Thousands
Thousands
Figure 7. Concentration curves: Urban versus rural area (PPP-adjusted US dollars)
2011
10
12
2006
2011
(b) Rural
10
8
8
6
6
4
4
2
2
0
0
y1 y2 y3 y4 y5 y6 y7 y8 y9 y10
y1
y2
y3
y4
y5
y6
y7
y8
y9 y10
Figure 8. Change in Inclusiveness: Urban versus rural areas
0,15
(a) Urban
Ybar
Omega
0,15
0,1
0,1
0,05
0,05
0
0
-0,05
-0,05
-0,1
-0,1
-0,15
-0,15
(b) Rural
Ybar
Figure 8 illustrates the inclusiveness developments in urban and rural areas separately between
2006 and 2011. In 2007, both dimensions contributed positively to inclusive growth in urban
and rural areas. During the Great Recession (2008-2009), urban area regressed in terms of both
dimensions; however rural area improved per capita income in 2008. On average, urban area
and rural area improved per capita income by 2.1% and 3.9% per year, respectively. On
average, urban area improved equity by 1% per year and rural area did .8% per year. Therefore,
urban area performed better in terms of progress in equity and rural area did so in terms of per
13
capita income progress. In terms of aggregate inclusiveness measure, on average, rural area
improved by 4.1% per year in comparison with a 3.1% annual improvement of urban area.
4.2 Regional developments between 2006 and 2011
In this section we present results for twelve regions to shed some light on possible cross-region
heterogeneities in terms of inclusive growth. The list of regions is composed of Istanbul (1),
West Marmara (2), Aegean (3), East Marmara (4), West Anatolia (5), Mediterranean (6), Central
Anatolia (7), West Black Sea (8), East Black Sea (9), Northeast Anatolia (A), Central East Anatolia
(B), and Southeast Anatolia (C).
Thousands
Figure 9. Per capita income in twelve regions (PPP-adjusted US dollars)
19
Istanbul (1)
West Marmara (2)
17
Aegean (3)
15
East Marmara (4)
West Anatolia (5)
13
Mediterranean (6)
11
Central Anatolia (7)
West Black Sea (8)
9
East Black Sea (9)
Northeast Anatolia (A)
7
Central East Anatolia (B)
5
2006
2007
2008
2009
2010
2011
Southeast Anatolia (C )
Figure 9 depicts the per capita income levels in twelve regions of Turkey. There is significant
heterogeneity in per capita income levels of regions. Between 2006 and 2011, per capita
income has increased in all regions except East Marmara (4) and East Black Sea (9).
We observe some mobility in terms of ordering of regions with respect to their average income
depending on their relative performances over the corresponding period (Figure 10). Overall,
six regions (Istanbul (1), Central Anatolia (7), West Black Sea (8), Northeast Anatolia (A), Central
East Anatolia (B), and Southeast Anatolia (C)) did not move from their 2006 position, however
the other six regions switched between their positions from 2006 to 2011. Mediterranean
14
region moved from 8th to 6th position, West Marmara moved from 6th to 5th position, East Black
Sea moved from 5th to 8th position, Aegean moved from 4th to 2nd position, East Marmara
moved from 3rd to 4th position, and West Anatolia moved from 2nd to 3rd position over the 20062011 period.
Thousands
Figure 10. Per capita income ordering in twelve regions (PPP-adjusted US dollars)
20
18
16
14
12
10
8
6
4
2
0
2006-ordering (right axis)
2006-income
2011-ordering (right axis)
2011-income
14
12
10
8
6
4
2
0
Figure 11. Equity ordering in twelve regions (PPP-adjusted US dollars)
0,62
2006-ordering (right axis)
2006-omega
2011-ordering (right axis)
2011-omega
0,6
14
12
10
0,58
8
0,56
6
0,54
4
0,52
2
0,5
0
15
Figure 11 shows the evolution of
(the measure of equity described in section 2) for the
twelve regions of Turkey from 2006 to 2011. During the corresponding period, eight regions
(Istanbul (1), Aegean (3), East Marmara (4), West Anatolia (5), Mediterranean (6), West Black
Sea (8), East Black Sea (9), Northeast Anatolia (A)) improved their equity measure of income
distribution, whereas the other four regions (Central East Anatolia (B), Southeast Anatolia (C),
West Marmara (2), Central Anatolia (7)) regressed in terms of distribution. When we compare
the relative performances, we see that every region changed its position in ordering from 2006
to 2011. Aegean (3), East Marmara (4), West Anatolia (5), Mediterranean (6), West Black Sea
(8), East Black Sea (9) improved their position in the ordering, whereas the rest of the regions
decreased their positions.
Now, we calculate the average rate of growth in the two dimensions ( and
) of inclusiveness
and compare the regional performances during 2006-2011 period. This is going to allow us to
compare the regional performances in terms of inclusive growth during the corresponding
period. Figure 12 shows the average annual growth rate of
and
for the twelve regions of
Turkey between 2006 and 2011.Panel (a) of Figure 12 illustrates the per capita income growth
performance of twelve regions between 2006 and 2011. Mediterranean and Southeast Anatolia
performed best at about 6% average annual growth rate followed by West Black Sea and
Northeast Anatolia at 4.5%. Central East Anatolia and Aegean regions’ per capita income grew
by roughly 3-3.5% per year on average, which is followed by Istanbul, West Marmara, and
Central Anatolia with a 2% average annual growth rate. In West Anatolia, per capita income
grew by roughly 1% per year on average. In East Black Sea and East Marmara, per capita income
decreased by .5% and 1.5% per year on average, respectively.
Panel (b) of Figure 12 depicts the developments in income distribution of the twelve regions
between 2006 and 2011.12 Equity ( ) levels of Istanbul, East Marmara, West Black Sea, and
East Black Sea grew between 1.5-2.5% per year during the corresponding period. Aegean, West
12
Note that the advantage of our equity measure is that it is a component of a single inclusiveness measure such
that equity and efficiency developments can be aggregated. Figure A.4 illustrates correlation between annual
growth rates of Gini coefficient and this paper’s equity measure for the 12 regions over 2006-2011.
16
Anatolia, and Mediterranean equity levels grew by roughly 1-1.5% per year. Equity levels of
West Marmara, Northeast Anatolia, and Southeast Anatolia almost did not change. And, Central
Anatolia and Central East Anatolia regressed roughly by .5% per year.
In order to get an aggregate measure of inclusive growth we sum up the two dimensions and
present the performances of the regions in Figure 13. Mediterranean region (7.2%) performed
best which is followed by West Black Sea (6.1%) and Southeast Anatolia (5.7%). Istanbul,
Aegean, and Northeast Anatolia followed them with an inclusive growth rate of roughly 4.5%
per year. West Marmara, West Anatolia, and Central East Anatolia inclusively grew by 2-3%per
year. East Marmara, Central Anatolia, and East Black Sea performed worst, however still
inclusively grew by roughly .5-1.5% per year over the corresponding period.
Figure 12. Components of inclusive growth for twelve regions
Average annual growth
(a) Per capita income (ybar)
0,07
0,06
0,05
0,04
0,03
0,02
0,01
0
-0,01
-0,02
17
(b) Equity (omega)
Average annual growth
0,025
0,02
0,015
0,01
0,005
0
-0,005
-0,01
Figure 13. Inclusive growth performance for twelve regions
0,08
Total (Ybar and Omega)
0,07
0,06
0,05
0,04
0,03
0,02
0,01
0
18
-0,3
0,08
0,06
0,04
0,02
0
-0,1
-0,02
0,1
-0,04
-0,06
0,3
Per capita income growth
Per capita income growth
Figure 14. Efficiency – equity tradeoff
(a) Short-term
0,12
0,07
(b) Medium-term (regions' 5-year
(annual
growth
rates)
0,1
0,06 average annual growth rates)
0,05
0,04
0,03
0,02
0,01
0
-0,01
-0,08
Equity growth
-0,01
0
-0,02
0,01
0,02
0,03
Equity growth
We draw the per capita income growth rates against equity growth in Figure 14 to illustrate
possible trade-off between the two dimensions of inclusive growth.13 Left panel of Figure 14
depicts every region’s annual growth rate for each year between 2006 and 2011. Therefore, we
have sixty observations in total. Since we draw each year’s growth rate, we consider this as a
short-term tradeoff between efficiency and equity. The right panel draws the 5-year average of
annual growth rates for the twelve regions, which returns twelve observations in total. We call
it medium-term tradeoff as we take average of five years’ growth rates. The tradeoff between
per capita income growth and equity growth seems to be more obvious over the medium-term;
however there is still some tradeoff in the short-term as well.
Sources of heterogeneity among the regional performances
Low-skilled and female workforces are the most vulnerable groups in Turkish labor market
similar to many other countries. These groups have very low employment rates (Figure 15).
Therefore one would naturally guess that improvement in these groups lead to improvement in
inclusive growth. In Figure 16, we draw a scatter plot of non-agriculture low-skilled
13
See Barro (2000), Deininger and Squire (1998), Forbes (2000), Lopez and Servén (2004), and Okun (1975) for
further discussion on equity and efficiency tradeoff.
19
employment growth against inclusive growth components. Both per capita income growth and
equity growth are positively correlated with the growth in non-agriculture low-skilled
employment. Therefore, one can consider the improvement in low-skilled employment as one
of the sources of Turkey’s inclusive growth.
Figure 15. Low-skilled and female employment rates in Turkey
0,4 (a) Low-skilled employment rate
0,25
(b) Female employment rate
(non-agriculture) 2006
0,35
(non-agriculture)
2011
0,3
0,2
0,25
2006
2011
0,15
0,2
0,1
0,15
0,1
0,05
Southeast Anatolia (C )
Central East Anatolia (B)
Northeast Anatolia (A)
East Black Sea (9)
West Black Sea (8)
Central Anatolia (7)
West Anatolia (5)
Mediterranean (6)
East Marmara (4)
Aegean (3)
0
West Marmara (2)
Guneydogu Anadolu
Ordadogu Anadolu
Kuzeydogu Anadolu
Dogu Karadeniz
Bati Karadeniz
Orta Anadolu
Akdeniz
Bati Anadolu
Dogu Marmara
Ege
Bati Marmara
Istanbul
0
Istanbul (1)
0,05
Figure 17 presents the scatter plots of growth in non-agriculture female employment rate
against inclusive growth components. Per capita income growth is positively correlated with
female employment growth, whereas equity is slightly negatively correlated. In aggregate
terms, female employment rate is positively correlated with inclusive growth. 14 The fact that
increase in female employment does not improve the equity dimension of inclusive growth
implies that the increase in female employment is not only observed in low-paying jobs but also
in good-paying jobs. Hence, both low-income deciles and high-income deciles improved their
per capita income through female employment and distribution did not improve
asymmetrically towards the low-income groups.
14
In congrous to our finding, Klasen (2006) provides cross-country evidence on the empirical regularity between
gender equality and pro-poor growth.
20
0,03
0,02
0,01
0
-0,01
0
0,2
-0,02
Per0,04
capita income
0,03
0,02
0,01
0
-0,2
-0,03
Inclusivegrowth
-0,01
0
0,2
-0,02
0,04
Low-skilled employment rate
growth (non-agriculture)
-0,2
0,04
Total
Low-skilled employment rate
growth (non-agriculture)
Low-skilled employment
rategrowth (non-agriculture)
Figure 16. Low skilled employment rate and inclusive growth
-0,1
-0,03
Per capita income growth
Equity
0,03
0,02
0,01
0
-0,01
0
0,1
-0,02
-0,03
Equity growth
0,04
0,02
0
-0,2
0
0,2
-0,02
-0,04
-0,06
Inclusive growth
0,06
0,05
0,04
0,03
0,02
0,01
0
-0,25
0,25
-0,01
-0,02
-0,03
-0,04
-0,05
Per capita income growth
Per capita income
Female employment rate growth
(non-agriculture)
0,06Total
Female employment rate growth
(non-agriculture)
Female employment rate growth
(non-agriculture)
Figure 17. Female employment rate and inclusive growth
0,06
Equity
0,04
0,02
0
-0,1
0
0,1
-0,02
-0,04
-0,06
Equity growth
4.3 Focusing on the Great Recession
In this section, we present regional and income group developments during the Great
Recession (2008-2009). In this regard, we first calculate percentage decrease in per capita
income for ten income deciles during 2008-2009. In percentage terms, the most affected
groups are the lowest earning groups as shown in Figure 18. This is probably due to the fact
that lower-earning groups are mostly composed of low-skilled labor and they are the most
vulnerable groups in terms of job losses during recessions. Per capita income of the lowestearning decile decreased roughly 12% whereas that of the highest-earning decile decreased
21
slightly less than 5% during the Great Recession. In general, per capita income of the nation
decreased by roughly 7% during 2008-2009 period.15
Percentage
change in income
Figure 18. Effect of Great Recession on income groups
-4
-9
-14
1st
2nd
3rd
4th
5th
6th
7th
8th
9th
10th
Ybar
The regional developments also reflect significant heterogeneity (Figure 19). In terms of per
capita income, the most affected region is Northeast Anatolia with a 20% decrease during the
Great Recession. Per capita income of East Marmara and Central East Anatolia decreased by
roughly 13%, and that of Istanbul decreased by roughly 11%. Per capita income levels of the
rest of the regions decreased less than or equal to 8% during the Great Recession. As an
exception, Southeast Anatolia increased its per capita income by roughly 4% during this period.
In terms of income distribution (equity), the most deteriorated region was Central Anatolia with
a 10% decrease in equity measure ( ). The distribution of Southeast Anatolia, West Marmara,
and West Anatolia are deteriorated by roughly 6-8%. West Black Sea, Istanbul, East Black Sea,
Central East Anatolia, and Aegean equity measures are deteriorated by less than or equal to
4%. Southeast Anatolia’s equity measure did not change, and Mediterranean and East Marmara
improved during the Great Recession.
In aggregate inclusiveness terms (per capita income and equity combination), Southeast
Anatolia was the most affected region during the Great Recession with a 20% decrease in
aggregate inclusiveness measure. Central East Anatolia, Istanbul, Central Anatolia, West Black
Sea, West Marmara, and East Black Sea deteriorated by 10-15%. In the rest of the regions
except Mediterranean, inclusiveness measure decreased by less than 10% during this period.
Mediterranean region improved slightly during the Great Recession.
15
OECD (2013) documents similiar results for a large set of countries.
22
When we compare the developments across the regions during the Great Recession, we
observe a negative correlation between per capita income and equity. The regions which are
affected most in per capita income are, on average, least affected in terms of equity. This again
reflects the tradeoff between efficiency and equity during the Great Recession similar to the
reflection in the entire period of 2002-2011.
Figure 19. Effect of Great Recession on twelve regions
0,05
0,06
0,04
0,02
0
-0,02
-0,04
-0,06
-0,08
-0,1
-0,12
Ybar
0
-0,05
-0,1
-0,15
-0,2
0,05
Central Anatolia (7)
Southeast Anatolia (C )
West Marmara (2)
West Anatolia (5)
West Black Sea (8)
Istanbul (1)
East Black Sea (9)
Central East Anatolia (B)
Aegean (3)
Northeast Anatolia (A)
Mediterranean (6)
East Marmara (4)
Northeast Anatolia (A)
East Marmara (4)
Central East Anatolia (B)
Istanbul (1)
West Black Sea (8)
East Black Sea (9)
Central Anatolia (7)
West Marmara (2)
Aegean (3)
Mediterranean (6)
West Anatolia (5)
Southeast Anatolia (C )
-0,25
Omega
0,06
Efficiency-equity: 2008-2009
Total
0
0,04
-0,05
0,02
-0,1
0
Equity growth
-0,15
-0,3
-0,2
Northeast Anatolia (A)
Central East Anatolia (B)
Istanbul (1)
Central Anatolia (7)
West Black Sea (8)
West Marmara (2)
East Black Sea (9)
East Marmara (4)
West Anatolia (5)
Southeast Anatolia (C )
Aegean (3)
Mediterranean (6)
-0,25
-0,2
-0,1
0
-0,02
-0,04
-0,06
-0,08
-0,1
-0,12
Per capita income growth
23
0,1
5. Discussion and Conclusion
In this paper we document some stylized facts to shed light on the inclusiveness of economic
growth in Turkey over the course of the last decade. We find that – on average – Turkish
economic growth was inclusive between 2002 and 2011. An examination of cross-region and
over-time developments for the available data period reveals significant heterogeneity in
inclusiveness of economic growth across these dimensions. We also check whether this
heterogeneity is related with developments in the vulnerable groups in Turkish labor market. In
particular, we show that increase in non-agricultural low-skilled employment rate and nonagricultural female employment rate are positively correlated with the improvement in
inclusiveness during the period of 2006-2011. Moreover, the heterogeneity based on regional
analysis reflects an efficiency-equity tradeoff in Turkey’s economic growth. As a result of limited
data availability, this paper does not provide a complete investigation on the sources of
heterogeneity in the twelve regions of Turkey, however gives important insights across some
dimensions.
24
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27
Appendix
25
Evolution of Income Deciles: Urban
43
20
38
Thousands
Thousands
Figure A1. Evolution of income deciles for twelve regions (PPP-adjusted US dollars)
6th
10
23
5
0
2007
2008
2009
2010
7th
18
8th
13
9th
8
Average
2011
Evolution of Income Deciles: Rural
25
14
20
12
10
Thousands
Thousands
2006
16
2nd
3rd
5th
15
6th
10
6
7th
8th
4
5
2
0
9th
Average
0
2007
2008
2009
2010
10th-right axis
2011
Evolution of Income Deciles: Istanbul (1)
55
50
23
45
40
18
35
30
13
8
3
2006
2007
2008
2009
28
2010
2011
Thousands
2006
Thousands
1st
4th
8
28
3rd
5th
28
18
2nd
4th
33
15
1st
1st
2nd
3rd
4th
5th
6th
7th
25
8th
20
9th
15
Ybar
10
10th-right axis
40
Evolution of Income Deciles: West Marmara (2)
35
20
30
Thousands
Thousands
25
1st
2nd
3rd
4th
25
15
10
5
5th
20
6th
15
7th
10
8th
9th
5
0
2008
2009
2010
Evolution of Income Deciles: Aegean (3)
1st
50
25
40
20
30
15
2nd
3rd
4th
5th
6th
20
10
5
10
0
0
7th
8th
9th
2006
30
10th-right axis
2011
Thousands
30
2007
2007
2008
2009
2010
Ybar
2011
10th-right axis
Evolution of Income Deciles: East Marmara (4)
50
25
40
Thousands
Thousands
2006
Thousands
Ybar
0
1st
2nd
3rd
4th
20
30
15
5th
6th
20
10
7th
8th
5
10
0
0
2006
2007
2008
2009
29
2010
2011
9th
Ybar
10th-right axis
50
Evolution of Income Deciles: West Anatolia
(5)
45
25
40
20
Thousands
Thousands
30
5
3rd
5th
30
10
2nd
4th
35
15
1st
6th
25
7th
20
8th
9th
15
Ybar
0
10
2007
20 Evolution of
2008
2009
2010
10th-right axis
2011
Income Deciles: Mediterranean (6)
40
35
15
30
10
5
Thousands
Thousands
2006
5th
20
6th
15
7th
8th
9th
2008
2009
2010
Evolution of Income Deciles: Central Anatolia (7) 35
20
30
25
15
20
10
15
10
5
5
0
0
2006
2007
2008
2009
2010
30
10th-right axis
2011
2011
Thousands
Thousands
Ybar
0
2007
3rd
4th
5
2006
2nd
25
10
0
1st
1st
2nd
3rd
4th
5th
6th
7th
8th
9th
Ybar
10th-right axis
Evolution of Income Deciles: West Black Sea (8)
1st
30
18
16
25
14
Thousands
Thousands
20
4th
20
10
15
6th
10
7th
6
5
2
0
9th
0
2007
2008
2009
2010
Ybar
2011
Evolution of Income Deciles: East Black Sea (9)
20
10th-right axis
35
30
Thousands
2006
25
15
1st
2nd
3rd
4th
5th
20
6th
10
15
7th
10
5
8th
9th
5
0
Ybar
0
2006
2007
2008
2009
2010
10th-right axis
2011
Evolution of Income Deciles: Northeast Anatolia (A)
30
18
16
25
14
20
12
10
15
8
Thousands
20
5th
8th
4
Thousands
3rd
12
8
Thousands
2nd
1st
2nd
3rd
4th
5th
6th
7th
10
6
4
5
2
8th
9th
Ybar
0
0
2006
2007
2008
2009
2010
31
2011
10th-right axis
30 (B)
Evolution of Income Deciles: Central East Anatolia
14
25
12
20
10
8
Thousands
Thousands
16
3rd
5th
6th
7th
10
4
8th
5
2
0
9th
Ybar
0
2007
14 Evolution of
2008
2009
2010
10th-right axis
2011
Income Deciles: Southeast Anatolia 25
(C)
12
20
10
8
15
6
10
4
Thousands
2006
Thousands
2nd
4th
15
6
1st
1st
2nd
3rd
4th
5th
6th
7th
8th
5
2
9th
Ybar
0
0
2006
2007
2008
2009
2010
32
2011
10th-right axis
Figure A2. Evolution of concentration curves for twelve regions (PPP-adjusted US dollars)
Thousands
Concentration Curves: Istanbul (1)
12,5
10
2006
2011
8
10,5
6
8,5
4
6,5
2
4,5
0
2,5
y1
Thousands
16,5
y2
y3
y4
y5
y6
y7
y8
y9 y10
Concentration Curves: Aegean (3)
14,5
2006
12,5
2011
Concentration Curves: West
Marmara (2)
2006
2011
y1 y2 y3 y4 y5 y6 y7 y8 y9 y10
15,5
Thousands
Thousands
12
13,5
11,5
Concentration Curves: East
Marmara (4)
2006
2011
10,5
9,5
8,5
7,5
6,5
5,5
4,5
2,5
3,5
15
13
11
Concentration Curves: West
Anatolia (5)
2006
2011
y1 y2 y3 y4 y5 y6 y7 y8 y9 y10
Thousands
Thousands
y1 y2 y3 y4 y5 y6 y7 y8 y9 y10
11,5
9,5
Concentration Curves:
Mediterranean (6)
2006
2011
7,5
9
5,5
7
5
3,5
3
1,5
y1 y2 y3 y4 y5 y6 y7 y8 y9 y10
y1 y2 y3 y4 y5 y6 y7 y8 y9 y10
33
11,5
10,5
Concentration Curves: Central
Anatolia (7)
2006
2011
9,5
11,5 Concentration Curves: West Black
Thousands
Thousands
12,5
8,5
Sea (8)
9,5
7,5
2006
2011
7,5
6,5
5,5
5,5
3,5
4,5
3,5
1,5
2,5
y1 y2 y3 y4 y5 y6 y7 y8 y9 y10
12,5
Concentration Curves: East Black
11,5
2006 Sea (9)
10,5
9,5
2011
Thousands
Thousands
y1 y2 y3 y4 y5 y6 y7 y8 y9 y10
9,5
8,5
7,5
8,5
6,5
7,5
5,5
6,5
4,5
5,5
2,5
1,5
y1 y2 y3 y4 y5 y6 y7 y8 y9 y10
Concentration Curves: Central
East Anatolia (B)
2006
2011
y1 y2 y3 y4 y5 y6 y7 y8 y9 y10
Thousands
Thousands
2011
2,5
3,5
6,5
2006
3,5
4,5
7,5
Concentration Curves: Northeast
Anatolia (A)
7
Concentration Curves: Southeast
Anatolia (C)
6
5
5,5
2006
2011
4
4,5
3
3,5
2,5
2
1,5
1
y1 y2 y3 y4 y5 y6 y7 y8 y9 y10
y1 y2 y3 y4 y5 y6 y7 y8 y9 y10
34
Figure A3. Evolution of inclusiveness for twelve regions
0,15
0,1
Change in Inclusiveness: Istanbul
(1)
Ybar Omega
0,15
0,1
0,05
0,05
0
0
-0,05
-0,05
-0,1
-0,1
-0,15
-0,15
0,15
0,1
Change in Inclusiveness: Aegean
Ybar
(3)
Omega
0,15
0,05
0
0
-0,05
-0,05
-0,1
-0,1
-0,15
-0,15
0,1
0,05
0
Change in Inclusiveness: West
Anatolia (5)
Ybar
Omega
0,25
0,2
0,15
0,1
0,05
0
-0,05
-0,05
-0,1
-0,15
Omega
Change in Inclusiveness: East
Marmara (4)
0,1
0,05
0,15
Change in Inclusiveness: West
Ybar
Marmara (2)
-0,1
-0,15
35
Ybar
Omega
Change in Inclusiveness:
Mediterranean (6)
Ybar
Omega
0,15
0,1
0,05
Change in Inclusiveness: Central
Anatolia (7)
Ybar
Omega
0,2
Change in Inclusieness: West Black
Sea (8)
0,15
Ybar
Omega
0,1
0,05
0
0
-0,05
-0,05
-0,1
-0,1
-0,15
0,15
0,1
0,05
-0,15
Change in Inclusiveness: East Black
Sea (9)
0,25
0,2
Change in Inclusiveness: Northeast
Anatolia (A)
Ybar
0,15
Ybar
Omega
Omega
0,1
0,05
0
0
-0,05
-0,05
-0,1
-0,15
-0,1
-0,2
-0,15
-0,25
0,2
Change in Inclusiveness: Central
East Anatolia (B)
0,15
0,1
0,05
0
Ybar
Omega
0,3
0,25
Chnage in Inclusiveness: Southeast
Anatolia (C)
0,2
Ybar
Omega
0,15
0,1
0,05
-0,05
0
-0,1
-0,05
-0,15
-0,1
-0,2
-0,15
36
2007
2008
2009
2010
2011 Average
Figure A4. Omega versus Gini coefficient (annual growth rates)
20
% Change in Gini Coefficient
15
-10
10
5
0
-5
0
5
-5
-10
-15
-20
% Change in Omega
37
10
15
Central Bank of the Republic of Turkey
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Endogenous Life-Cycle Housing Investment and Portfolio Allocation
(Cengiz Tunç, Denis Pelletier Working Paper No. 13/45, December 2013)
Analyzing Banks' Opinions on the Loan Supply and Loan Demand Using Multi-Country Bank Lending Survey Data
(Defne Mutluer Kurul Working Paper No. 13/44, November 2013)
Interest Rate Fluctuations and Equilibrium in the Housing Market
(Yavuz Arslan Working Paper No. 13/43, November 2013)
Asymmetric Behaviour of Inflation around the Target in Inflation-Targeting Emerging Markets
(Kurmaş Akdoğan Working Paper No. 13/42, November 2013)
A Quest for Leading Indicators of the Turkish Unemployment Rate
(Burcu Gürcihan Yüncüler, Gönül Şengül, Arzu Yavuz Working Paper No. 13/41, November 2013)
Türkiye’de Konjonktürel Etkilerden Arındırılmış Cari İşlemler Dengesi
(A. Hakan Kara, Çağrı Sarıkaya Çalışma Tebliği No. 13/40, Kasım 2013)
Intensive Margin and Extensive Margin Adjustments of Labor Market: Turkey versus United States
(Temel Taşkın Working Paper No. 13/39, October 2013)
Day-of-the-Week Effects in Subjective Well-Being: Does Selectivity Matter?
(Semih Tümen, Tuğba Zeydanlı Working Paper No. 13/38, October 2013)
The Effects of Government Spending Shocks on the Real Exchange Rate and Trade Balance in Turkey
(Cem Çebi, Ali Aşkın Çulha Working Paper No. 13/37, October 2013)