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Structural Adjustment and Trade in Turkey: A General Equilibrium Analysis of the Export-Led Versus Domestic Demand-Led Strategies of Development

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  • Yeldan, A. Erinc

Abstract

This paper attempts to assess the feasibility of the current strategy of manufactured export-led growth for Turkey over the Fifth and Sixth Five-Year Plan periods (1985-1994). The explicit hypothesis of the paper is that a domestic market, wage-goods oriented development strategy with agriculture leading the process will be more conducive to Turkey's long-term economic growth, as compared to an export-oriented strategy. The simulation experiments are conducted with the aid of a dynamic micro-planning model which belongs to a class of price-endogenous constructs known as Computable General Equilibrium (CGE) models. The model as applied to Turkey distinguishes seven economic sectors, four types of labor, three consumer groups, seven social classes, and a government. In addition, it accommodates both fixed and flexible wages along with a disequilibrium mechanism of labor allocation, endogenous rural-urban migration, international trade flows with government intervention, and separate rules of allocation for the private -versus- public fixed investment. The overall conclusion that is supported by this study is that by combining a time-wise regressive, selective export-promotion program with a domestic demand oriented, wage-goods strategy, Turkey can achieve a superior growth performance over the current strategy of manufactured export-led industrialization. The model results further emphasize the pressing need for the revitalization of the domestic demand, and the importance of the agricultural productivity growth in promoting Turkey's overall objectives of industrialization, income equity, and foreign trade over the Fifth and Sixth Plan periods.

Suggested Citation

  • Yeldan, A. Erinc, 1987. "Structural Adjustment and Trade in Turkey: A General Equilibrium Analysis of the Export-Led Versus Domestic Demand-Led Strategies of Development," Bulletins 7464, University of Minnesota, Economic Development Center.
    • Handle: RePEc:ags:umedbu:7464
    DOI: 10.22004/ag.econ.7464
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    References listed on IDEAS

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    1. Cline, William R., 1982. "Can the East Asian model of development be generalized?," World Development, Elsevier, vol. 10(2), pages 81-90, February.
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    Cited by:

    1. Turhan, Ibrahim M., 2008. "Why did it work this time: a comparative analysis of transformation of Turkish economy after 2002," MPRA Paper 31158, University Library of Munich, Germany.

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