THE IMPACT OF THE CUSTOMS UNION WITH THE EUROPEAN UNION ON TURKEY'S ECONOMIC GROWTH


MIHCI S. , Akkoyunlu-Wigley A.

ARGUMENTA OECONOMICA, vol.22, no.1, pp.163-179, 2009 (Journal Indexed in SSCI) identifier

  • Publication Type: Article / Article
  • Volume: 22 Issue: 1
  • Publication Date: 2009
  • Title of Journal : ARGUMENTA OECONOMICA
  • Page Numbers: pp.163-179

Abstract

Since 1980 Turkey has undertaken a number of reforms targeting trade liberalization. The latest phase in that process was the establishment of Customs Union with the European Union in 1996. This study aims to analyze the effects of that Customs Union on technology-led growth in Turkey. A direct test of the technology-led growth induced by the Custom Union is performed by estimating total factor productivity and labor productivity equations for Turkish manufacturing industry sectors. An indirect test of technology led growth is also performed by estimating a sectoral production function which includes a trade variable. The data set used for the estimation is a panel of 12 manufacturing industry sub-sectors for the period 1994-2001. According to the estimation results of the labour productivity equation, import volume has a positive and significant effect on output per labour. In the total output equation estimation the import variable, volume of imports from EU countries, also implies a positive effect. It is concluded that productivity improving effects generated by manufacturing imports from EU countries can be regarded as one of the positive effects of the Customs Union on the Turkish economy.