In this study, spatial structural changes experienced in the world economic system, were evaluated first. Special emphasis is given on emerging market economies. Economic globalization has been a powerful process in reshaping or re-inforcing clustered growth of economic sectors in these countries. Only few regions seem to enjoy agglomeration of economic activities in every country. On the contrary, the phenomenon is common across countries.
Second, in the third section, the post-neo-classical growth theory, its assumptions, methodological approaches and empirical studies are discussed. The discussion revealed that although the original theory focuses on convergence in per capita productivity rates, the literature is often cross referenced. Empirical studies are thus studied under different titles: employment growth, distribution of per capita productivity, and convergence in per capita productivity rates. Studies that focus on convergence between different countries were not the main focus here, so, studies that focus on regional integration are discussed mostly. Different approaches to measurement of productivity inequalities are also discussed.
These discussions on post neo-classical literature revealed that certain factors are thought to be influential on regional per capita productivity growth and convergence.
Jacobs externalities, spatial spillovers between regions, human capital, population growth, competition and entrepreneurial activity.
The discussion on growth of employment revealed that employment growth is more associated with static externalities and in many emerging market economies, employment growth is clustered. This gives hints about regional productivity convergence as well, but these two different things should not be confused.
In the fourth section, employment growth in Turkey is studied for the 1990-2000 period. Following a survey on empirical literature, it is found that similar factors as elsewhere in emerging market economies could be influential in employment growth. An empirical study made for employment growth in urban sectors, manufacturing and services. It is found that distance to major metropolitan centers that are gateways to international markets and excessive population growth played a positive role in the growth of employment, while entrepreneurial activity seems to have played a negative role in employment growth.
In the fifth section, convergence in regional productivity rates in Turkey is evaluated. Both sigma and beta convergence analyses are held. Most of the analyses showed that there was convergence and this is inline with empirical findings that purely focus on productivity convergence, and not income convergence. Following Temel et al. (1999) it could be concluded that population growth could be hampering income convergence stronger. While people move to urban areas, they work in more productive jobs, but participation in the workforce drops. Thus, there can be productivity convergence but no income convergence in a given region. Productivity convergence does not guarantee income convergence in a country where participation to labor force is low and wages are suppressed.
On the side of productivity growth, inequalities were established long ago and are likely to persist for a long time, despite productivity convergence. Although metropolitan regions did not experience growth but experienced rather declining productivity in most urban sectors, they still remained powerful. Growth in agricultural productivity in some regions on the other hand contributed to a decrease in inequalities. Still, an important finding is that inequalities in productivity in manufacturing industries grew between geographical regions. The Northwest and Western parts have reinforced their position as industrial centers.
A conditional beta convergence analysis and supporting ESDA showed that important factors contributing to overall convergence in productivity per capita in the aggregate economy were, excessive growth in knowledge workers, growth in share of entrepreneurs and administrators, presence of large FDI companies and presence of spatial spillovers. This study provides unique findings on Turkey in this sense: the role of FDI is found to be not so strong. The role of entrepreneurial activity is found to be very important. The spatial spillovers may extend as far as 500 km, resembling the dual economy between East and West.
As a result, it could be concluded that especially manufacturing industries continue to concentrate around globalizing city regions and benefit positive spatial spillovers. On the other hand, the country has specialized more in labor intensive manufacturing industries and services. Development of infrastructure in Southeast and Eastern Anatolia is likely to have significant effects in improving productivity in agriculture, but in few centers. Also, some manufacturing centers are emerging in the East.
The picture on the West is more about regional integration and dispersion of manufacturing activities, while in the East it is more about growth of agriculture and resource based manufacturing industries in few core locations. It may be concluded that these two parts of the country still experience different episodes of development. Increasing trade with non-EU countries are likely to have had significant effects in the post 2000 period. Thus, further studies should be done to assess both regional growth and evolution of regional inequalities.
Excessive growth of population is probably not beneficiary for regional productivity growth, but the statistical results were not significant. Still, saying that in most of the cases, excessive population growth has likely a detrimental effect to productivity growth should not be seriously objected, following empirical literature.
This may be the reason why greater metropolitan cities do not perform well, and a reason that contributes to decreases in productivity levels. Therefore, populist and rent seeking policies to boost metropolitan populations should not be supported with closed eyes.
Due to data constraints, it was not possible to fully capture the influence of FDI on regional productivity levels. The model used in this study suggests that there is some positive and significant influence, but very small. It is likely that FDI investments
could have diverse effects in different industries. In metropolitan areas FDI investments are more services oriented, while on the close vicinity, they are more manufacturing oriented. In rural regions, they are more agricultural oriented. The impact of FDI should be higher in the post 2000 period than before, because until 2000 FDI inflow to Turkey were not very high compared to other emerging market economies. In fact, the amount of FDI inflows to Turkey during 1991-2003 was only a third of the amount during 2003-2004. Thus, further studies are necessary to evaluate the role of FDI.
It should be noted that this empirical study did not take into account many factors that may have great influences in the way regional production systems evolve. These include regional and national policies addressing firms, individuals, or target regions. Institutional developments in state organizations and better spatial management, decentralization of governance power to regional or local authorities should be new factors in the post 2000 period that requires attention. Furthermore, due to geo- political conditions in Turkey, investor’s perception of risk and return should be taken as an important factor influential on regional production systems.
It is also likely that in the post 2000’s Turkey the migration issue will still continue to play a key role in regional development. However, unlike in the pre-1990 period, now in-migration to Turkey from other countries and concentration of migrants in gateway cities like Istanbul has become an important phenomenon that requires more attention. Such types of migration is likely to have significant effects on productivity growth especially in sectors like tourism, construction, retailing and personal services, but it is hard to detect these effects due to rise of the informal sector and lack of data. On the other hand, it is a challenge that should be faced, because such phenomena can not be detached from the process of globalization.