Facts on Business Dynamism in Turkey

46 Pages Posted: 7 Oct 2019

See all articles by Ufuk Akcigit

Ufuk Akcigit

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); Center for Economic and Policy Research (CEPR)

Yusuf Emre Akgunduz

Government of the Republic of Turkey - Central Bank of the Republic of Turkey

Elif Tok

Government of the Republic of Turkey - Central Bank of the Republic of Turkey

Seyit Mumin Cilasun

Government of the Republic of Turkey - Central Bank of the Republic of Turkey

Fatih Yilmaz

Government of the Republic of Turkey - Central Bank of the Republic of Turkey

Date Written: September 2019

Abstract

In this paper, we investigate various trends on competition and business dynamism in the Turkish manufacturing sector. More specifically, using micro level administrative data sets of firm balance sheets, credit registry and social security records, we focus on moments such as firm entry, exit, profitability, worker reallocation, labor share, labor productivity and credit distributions, among several others. Our results indicate that business dynamism in the Turkish manufacturing sector was relatively stable and even improving until 2012 but has been declining since then. We find that market concentration and exit rates have started to rise, yet new business creation, labor share of output and economic activities of young firms have declined. Using a model with endogenous market competition, we show that a adverse shock to cost of R&D investment can explain these empirical trends. We identify increases in financing costs after 2012 of followers as a potential mechanism for our findings in Turkey. We next perform a policy analysis with our model which suggests that providing support (e.g., R&D subsidy) to immediate followers can undo the adverse effects of the negative shock to financing costs and therefore foster competition and faster growth.

Keywords: business dynamism, Competition, Market concentration, Turkish economy

JEL Classification: E22, E25, L12, O31, O33, O34

Suggested Citation

Akcigit, Ufuk and Akgunduz, Yusuf Emre and Tok, Elif and Cilasun, Seyit Mumin and Yilmaz, Fatih, Facts on Business Dynamism in Turkey (September 2019). CEPR Discussion Paper No. DP13999, Available at SSRN: https://ssrn.com/abstract=3464528

Ufuk Akcigit (Contact Author)

University of Chicago - Department of Economics ( email )

1126 E. 59th St
Chicago, IL 60637
United States

HOME PAGE: http://www.ufukakcigit.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Center for Economic and Policy Research (CEPR) ( email )

London
United Kingdom

Yusuf Emre Akgunduz

Government of the Republic of Turkey - Central Bank of the Republic of Turkey ( email )

Istiklal Cad. 10 Ulus
06100 Ankara, Ankara 06050
Turkey

Elif Tok

Government of the Republic of Turkey - Central Bank of the Republic of Turkey ( email )

Istiklal Cad. 10 Ulus
06100 Ankara, Ankara 06050
Turkey

Seyit Mumin Cilasun

Government of the Republic of Turkey - Central Bank of the Republic of Turkey ( email )

Istiklal Cad. 10 Ulus
06100 Ankara, Ankara 06050
Turkey

Fatih Yilmaz

Government of the Republic of Turkey - Central Bank of the Republic of Turkey ( email )

Istiklal Cad. 10 Ulus
06100 Ankara, Ankara 06050
Turkey

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