Planning for regional development: A general equilibrium analysis for Turkey

Abstract

In this study we investigate the macroeconomic effects of two complementary policy environments to invigorate growth employment and income equality across two broadly differentiated regions in Turkey: poor and high/mid-income. With the aid of a regional computable general equilibrium model that disaggregate the production structure into 13 sectoral activities and two geographical regions we first study the long run dynamic effects of a regional production and investment subsidization program. Second we supplement this environment by a productivity enhancement program in the poor region. Our results reveal that regionally differentiated productivity enhancing measures coupled with a subsidized investment program to facilitate capital accumulation and reduce the outflow of factors out of the poor region are of utmost importance in designing a sustained growth path to pull the aggregate economy from the dual traps of middle income and of poverty. © 2015 Elsevier B.V. All rights reserved.