Facts on Business Dynamism in Turkey

Ufuk Akcigit, Yusuf Emre Akgunduz, Elif Ozcan Tok, Seyit Cilasun () and Fatih Yilmaz

No 13999, CEPR Discussion Papers from Centre for Economic Policy Research

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; Market concentration; Competition; Turkish economy (search for similar items in EconPapers)
JEL-codes: E22 E25 L12 O31 O33 O34 (search for similar items in EconPapers)
Date: 2019-09
New Economics Papers: this item is included in nep-ara, nep-com, nep-ent, nep-ind, nep-lma and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Facts on business dynamism in Turkey (2020)
Working Paper: Facts on Business Dynamism in Turkey (2019)
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