The Link Between Regional Efficiency And Public Policies In Turkey: An Analysis Of A Panel Threshold Model

Abstract

The link between regional efficiency and public policies in Turkey: An analysis of a panel threshold model This study aims to investigate if there are any impacts of two major public policy tools: namely, investment incentives and public investment. on private sector productivity/efficiency in Turkish provinces. Thus, it focuses on the question of whether these policies can reduce regional growth and income inequalities through their effects on provincial efficiency The study also examines the issue of whether there is an equality-efficiency tradeoff stemming from the provision of public support. To this end, employing a panel data from 58 provinces, the study first estimates a translog stochastic production function to extract technical efficiency component. Then, it specifies an efficiency model that embodies investment incentives and public investment along with standard variables. Finally the study modifies the efficiency model to examine the existence of a threshold for provincial economic performance above which investment subsidies and/or public investment affect efficiency differently The findings indicate that both public policies positively influence technical efficiency at provincial level and they have the same efficiency impacts on provinces irrespective of their performances, a result that points to the absence of equality/efficiency tradeoff in Turkey