Latent Comparative Advantages of the Turkish Economy: Evidence from the GIFF Application

Eren Can Gurbuz () and İsmail Tuncer
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Eren Can Gurbuz: Huazhong University of Science and Technology

Atlantic Economic Journal, 2023, vol. 51, issue 2, No 4, 169-188

Abstract: Abstract This study identifies the key industries with latent comparative advantages which have the potential to stimulate economic growth and structural change in Turkey (Türkiye). The New Structural Economics asserts that factor endowment differences dictate systematic structural differences in the economy. This factor endowment evolves over time and determines the latent comparative advantages of the economy. For successful industrial upgrading, economic growth and catching up, the industrial structure should be chosen to fit the given factor endowment best. To identify industries with latent comparative advantages, this study exploited the growth identification and facilitation framework proposed by New Structural Economics for the Turkish economy. Along with the pure growth identification and facilitation framework methodology, this study also benefits from product space tools, namely PRODY, measuring the income/productivity level of goods; EXPY, measuring the income/productivity level of a country’s export basket, and economic complexity and complexity outlook indices. The Baltic countries (Estonia, Latvia, Lithuania), and Poland and Slovakia, were identified and selected as benchmark countries for comparison. Based on the export structure comparison of benchmark countries, the results indicate that Turkey has latent comparative advantages in agricultural and some labor-intensive industries. The most binding constraints of the identified products and industries with latent comparative advantages were detected via growth diagnostic analysis. In light of the results, measures that ease latent comparative advantages have been proposed for certain industries to reduce production cost, enhance competitiveness in national and global markets, and foster the Turkish economy's economic transformation.

Keywords: Turkish Economy; New Structural Economics; Growth Identification and Facilitation Framework; Latent Comparative Advantage; Product Space Methodology (search for similar items in EconPapers)
JEL-codes: D41 H54 L16 O47 O57 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11293-023-09772-x

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