Micro- and Macroeconomic Impacts of a Place-Based Industrial Policy

94 Pages Posted: 5 Jun 2023

See all articles by Enghin Atalay

Enghin Atalay

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Ali Hortaçsu

University of Chicago; National Bureau of Economic Research (NBER)

Mustafa Runyun

affiliation not provided to SSRN

Chad Syverson

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Mehmet Fatih Ulu

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

Multiple version iconThere are 2 versions of this paper

Date Written: June 2, 2023

Abstract

We investigate the impact of a set of place-based subsidies introduced in Turkey in 2012. Using firm-level balance-sheet data along with data on the domestic production network, we first assess the policy’s direct and indirect impacts. We find an increase in economic activity in industry-province pairs that were the focus of the subsidy program, and positive spillovers to the suppliers and customers of subsidized firms. With the aid of a dynamic multi-region, multi-industry general equilibrium model, we then assess the program’s impacts. Based on the calibrated model we find that, in the long run, the subsidy program is modestly successful in reducing inequality between the relatively under-developed and more prosperous portions of the country. These modest longerterm effects are due to the ability of households to migrate in response to the subsidy program and to input-output linkages that traverse subsidy regions within Turkey.

JEL Classification: D57, F16, H25, J38, R12

Suggested Citation

Atalay, Enghin and Hortaçsu, Ali and Runyun, Mustafa and Syverson, Chad and Ulu, Mehmet Fatih, Micro- and Macroeconomic Impacts of a Place-Based Industrial Policy (June 2, 2023). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2023-77, Available at SSRN: https://ssrn.com/abstract=4467589 or http://dx.doi.org/10.2139/ssrn.4467589

Enghin Atalay

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Ali Hortaçsu

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Mustafa Runyun

affiliation not provided to SSRN

Chad Syverson (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Mehmet Fatih Ulu

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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