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The Relationship Imports and Exports in Free Zones Have with Turkiye Foreign Trade and Employment: The Fourier Autoregressive Distributive Lag (ADL) Hidden Cointegration Test

Author

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  • Muge Seda Ates

    (Inonu University, Economics and Administrative Sciences Faculty of Sciences, Department of Finance, Malatya, Turkiye)

  • Gizem Ates

    (Inonu University, Economic and Administrative Faculty of Sciences, International Trade and Department of Business Administration, Malatya, Turkiye)

  • Demet Toktas

    (Inonu University, Economic and Administrative Faculty of Sciences, Labor Economics and Industry Relations Department, Malatya, Turkiye)

  • Esra Canpolat Gokce

    (Inonu University, Economic and Administrative Faculty of Sciences, Department of Econometrics, Malatya, Turkiye)

Abstract

Free zones, which are implemented as a development policy on the basis of the objectives of increasing exports, investments, and employment, facilitating imports, contributing to domestic production, ensuring technology transfer, and balancing regional differences, are special areas where tax advantages are offered to companies. The aim of this study is to investigate the level of contribution of firms supported by tax advantages in Turkiye’s free zones to Turkiye’s foreign trade and employment and to investigate the relationship between these variables. Within this framework, data compiled for monthly periods between 2013.01-2022.05 were used. The Fourier ADL hidden cointegration test was conducted by constructing 7 different models with the identified variables. In the study, it is reported that the contribution of free zones import-export with tax advantages to Turkiye’s foreign trade and employment mechanism is weak. In this framework, it has been tried to present policy recommendations for taxation, foreign trade, and employment based on the principles of both integrating free zones into international trade and achieving a more collaborative, innovative, and qualified structure to eliminate regional differences in local economies.

Suggested Citation

  • Muge Seda Ates & Gizem Ates & Demet Toktas & Esra Canpolat Gokce, 2023. "The Relationship Imports and Exports in Free Zones Have with Turkiye Foreign Trade and Employment: The Fourier Autoregressive Distributive Lag (ADL) Hidden Cointegration Test," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 73(73-1), pages 385-418, June.
    • Handle: RePEc:ist:journl:v:73:y:2023:i:1:p:385-418
    DOI: 10.26650/ISTJECON2022-1211005
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    More about this item

    Keywords

    Free zones; tax incentives; foreign trade; employment; Fourier ADL hidden cointegration test JEL Classification: E24 ; F16 ; H2;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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