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The Role of the State in the Turkish Economy

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Abstract

The role of the state in economic performance is critical for almost every country. This chapter reviews and assesses the effectiveness of the state in the Turkish economy over the last 15 years. A well-functioning state is key for Turkey to be prosperous and have a larger say in the global economy and for its citizens to have higher living standards. Turkey needs new investments and reforms to escape the middle-income trap. To make this happen, the state should undertake a number of important tasks, from industrial policies to institutional reforms. This chapter argues that making the institutional infrastructure more inclusive, implementing smart industrial policies, and improving the welfare state mechanism are the vital issues the state should focus on to take the Turkish economy to higher steps of the development ladder.

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Notes

  1. 1.

    To look at the data, see the World Development Indicators (accessed 1 May 2017): http://data.worldbank.org/indicator/NY.GDP.PCAP.CD?end=2008&start=2001.

  2. 2.

    Economic growth declined by 4.7 per cent in 2009. However, in the two following years, the Turkish economy bounced back spectacularly, with an average growth rate of around 9 per cent. See Tatliyer and Gur (2016).

  3. 3.

    To reduce redundant public expenditures, the government reduced, for example, the number of ministries and sold government-owned properties for members of parliament. See Patton (2006) for further discussion.

  4. 4.

    Thanks to budget discipline and low public debt , the government used expansionary fiscal policies to galvanize economic activity when it was necessary; for example, after the GFC and the failed coup attempt.

  5. 5.

    The state has started using public finance more freely since the compulsory relationship with the IMF finished. The 19th stand-by agreement with the IMF ended in 2008. Turkey paid the last debt instalment of USD 421 million in 2013 and wiped out all debt owed to the IMF . This move brought an end to the 52-year debt history with the IMF .

  6. 6.

    Düzel (2003), quoted from Patton (2006: 523).

  7. 7.

    “Istanbul’s Yavuz Sultan Selim Bridge Toll Set to Be $3 Plus VAT” Daily Sabah, 15 August 2016. Accessed 12 April 2017. https://www.dailysabah.com/business/2016/08/15/istanbuls-yavuz-sultan-selim-bridge-toll-set-to-be-3-plus-vat.

  8. 8.

    For example, the minimum wage was increased by 30 per cent in a single year (2016).

  9. 9.

    To look at the data, see the OECD https://stats.oecd.org/Index.aspx?DataSetCode=EDU_CLASS (Accessed on 17.04.2017) and http://www.oecd.org/edu/skills-beyond-school/educationataglance2008oecdindicators.htm (Accessed on 17.04.2017).

  10. 10.

    To look at the data, see the OECD http://www.oecd.org/social/expenditure.htm (Accessed on 18.04.2017).

  11. 11.

    For example, the Gini coefficient is 0.42, 0.47, 0.54, and 0.63 in China , Mexico , Brazil , and South Africa, respectively. See http://hdr.undp.org/en/content/income-gini-coefficient (Accessed on 12.04. 2017).

  12. 12.

    “Turkey’s Shadow Economy Decreasing in Size”, Daily Sabah, 15 January 105. Accessed 15 April 2017. 15 January 2015, https://www.dailysabah.com/economy/2015/01/15/turkeys-shadow-economy-decreasing-in-size.

  13. 13.

    It is important to note that Turkey performs better in terms of the quality of institutions when the indicators of institutional quality are based on objective data, not perceptions.

  14. 14.

    To look at the data, see the World Development Indicators http://data.worldbank.org/indicator/NV.IND.MANF.ZS?end=2015&start=1999 (accessed 20 April 2017).

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Authors and Affiliations

  1. Department of Economics and Finance, School of Business, Istanbul Medipol University, Istanbul, Turkey

    Nurullah Gur

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  1. Nurullah Gur
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Editors and Affiliations

  1. Department of Economics School of Management and Administrative Sciences, Istanbul Sehir University, Istanbul, Turkey

    Ahmet Faruk Aysan

  2. Department of Economics and Finance School of Business, Istanbul Medipol University, Istanbul, Turkey

    Mehmet Babacan

  3. Department of Economics and Finance School of Business, Istanbul Medipol University, Istanbul, Turkey

    Nurullah Gur

  4. Department of Economics and Finance School of Business, Istanbul Medipol University, Istanbul, Turkey

    Hatice Karahan

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Gur, N. (2018). The Role of the State in the Turkish Economy. In: Aysan, A., Babacan, M., Gur, N., Karahan, H. (eds) Turkish Economy. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-70380-0_2

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  • DOI: https://doi.org/10.1007/978-3-319-70380-0_2

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