Productivity Cycles in Public and Private Manufacturing Sectors: Evidence from Turkey

Abstract

This paper compares the productivity cycles of public and private manufacturing sectors in Turkey by using a regime shifting model applied through the multimove Gibbs-sampling approach over the quarterly period 1988Q1:2006:Q4. By considering timing of the business cycles for the sample period, it is shown that: 1) the public sector has higher productivity growth rates compared to the growth rates of private sector and total productivities, in both low and high productivity growth regimes; 2) the productivity in public sector is procyclical in periods of real shocks, such as stagnation or earthquakes (i.e., 1989 and 1999 crises); 3) the productivity in private sector is procyclical in periods of financial shocks (i.e., 1994 currency crisis, 1998 Russian crisis and 2001 financial crisis); 4) the productivity in the public sector has a smoothing effect in terms of reducing the effects of private sector productivity cycles.

Keywords: Regime-Shifts, Productivity Cycles, Private Sector, Public Sector, Turkey

JEL Classification: E32, E44