1. Growth, Productivity & Employment in Agriculture, Manufacturing & Services

2. General Outlook

3. Source: Pamuk, 2006

4. Percentage Shares of Sector in GDP

5. Source: Pamuk, 2006

8. Employment Shares

12. AGRICULTURE

13. Basic Trends Between 1880 and 2000 Population has increased from 13 million to 68 million in 2000. GDP per capita has increased 6 times. Agricultural output in constant prices increased 9 times. So we can say that agricultural production has managed to meet the increased per capita demand.

14. Agricultural Shares in Employment and GDP Share of population employed in agriculture GDP share of agricultural output 188019502000 80% 35% 65%53%13%

15. ----- GDP ------ Employment

16. Employment in Agriculture in Recent Years Years Share Of Agricultural Employment 1996 42,8% 1997 40,8% 1998 40,5% 1999 41,4% 2000 36% 2001 37,6% 2002 34,9% 2003 33,9% 2004 34% 2005 29,5%

17. Share of Agriculture in GDP in Recent Years Years Share Of Agricultural Output 199617,4% 199715,1% 199818,5% 199916% 200015,4% 200112,8% 200213% 200313,4% 200412,9% 200511%

18. Growth Trends 1880 -1950 Period Agricultural output increased only by 1% annually. Most of the increase in agricultural output was attributable to the increase in inputs; labor and land. Availability of land, expansion of area under cultivation are the key factors that were providing increase in agricultural output especially until 1960. Additional government policies provided that agricultural sector is dominated by the small and medium sized enterprises. Fluctuations due to war years are quite remarkable. 1950 -1980 Period In this period the annual growth rate of agricultural output is nearly 3% per annum. The growth is mostly leaded by additional cultivated land until 1960 but afterwards the shift from extensive production to intensive production has contributed to growth. 1980 – 2000 Period Output growth rate slowed down to 2% per annum. Land productivity also decreased but thanks to urbanization labor productivity increased.

19. Growth Rate for Agricultural Output Level in Recent Years Years Growth Of Agricultural Output Level 19964,9% 1997-2,2% 19989,3% 1999-5,6% 20003,8% 2001-6% 20027,4% 2003-2,4% 20042% 20055,7%

20. Productivity in Agriculture Decomposition of Productivity: 1-Land Productivity2-Labor Productivity 1880 – 1950 :Both labor and land productivity growth rate is less than 0,5% 1950 – 1980 :Land productivity increases thanks to irrigation methods, fertilizers and aggricultural machinery. Labor productivity is still low. 1980 – 2000 :Land productivity slowed down but labor productivity increased thanks to urbanization. Total factor productivity couldn’t be very large until 1950 but after 50’s its annual growth rate was nearly 1,7%, nearly 6 times as of before 1950.

21. Productivity in Agriculture The gap between the land productivity of Turkey and Western countries remained nearly same as 1:3. But the gap for labor productivity was much karger and widened during the second half of the century. In addition to low labor productivity, small and medium sized enterprises promoted the unpaid family workers and people in agriculture sector became the poorest part of the society. This was mostly due to the fact that Turkey was unable to release the population employed in agriculture and start industrilization and urbanization rapidly.

22. Productivity in Agriculture Reasons for late urbaniziation: The inability of urban sectors to create new jobs and opportunities for people who are employed in agriculture. Problems in educational system brought that undereducated population in the rural area couldn’t pursue new job opportunities in urban areas.

23. Source: Pamuk, 2006

24. STRUCTURAL CHANGE in TURKEY

25. Labor market outcomes reflect the interaction of demografic and economic factors. Especially population growth and urbanization led structural changes in employment

26. Turkey’s 2004 employment rate is 43,7% -one of the lowest in the world- while E- 15 has 65% rate From 1980 to 2004 working age population increased 23 million, however only 6 million net jobs were created Source: World Bank, Turkey Labor Market Report (2006)

28. We see similar trends in all over the world.

29. Turkey’s job creation performance is not as good as its growth rates. Although it is explained by only high supply of labor because of demografic change, Yeldan (2006) argues it is also because of bad structure of industry in Turkey; that is industry in Turkey is dependent to developed countries and it is composed of subcontracting networks.

30. Employment Shares by Sector

31. Employment rate differences mostly derive from low FLFP rates in Turkey.

34. FLFP rates in agriculture are higher relatively, therefore women did not favor urbanization

35. MANUFACTURING

36. General Trends Until 1980 Turkey has the aim of “ industry based growth” since the beginning of 5 year devolopment plans period. Until 1980 import substitution has the main characteristic of the manufacturing sector in Turkey. Import quotas, manufacturing incentives are key elements of period.

37. Trends After 1980 After 1980 there is significant progress towards establishing market economy through introduction of export-oriented industrilization. Thanks to this progress and incentives for exports, private sector increased its share in production and in investment regarding the manufacturing sector. 80% of production and 95% of fixed investment is realized by private sector, after the huge privatizations in recent years. Growth in manufacturing is mostly thanks to the dynamism and investments of private sector. Due to 2001 crisis manufacturing output decreased drastically. But after crisis period two elements have been the life savers for manufacturing. a-) Domestic Demandb-) Sustained Export Performance

38. Share of Manufacturing in Employment in Recent Years Years Share Of Manufacturing in Employment 199622.9% 199724.1% 199823.6% 199922.8% 200024% 200122.7% 200223% 200322.8% 200423% 200524.7%

40. Growth Rate of Manufacturing in Recent Years Years Growth Rate of Manufacturing 19967.1% 19979.2% 19981.8% 1999-6.3% 20005.5% 2001-7.2% 20025.6% 20035% 20048.8% 20058.6%

41. Share of Manufacturing in GDP in Recent Years Years Share Of Manufacturing in GDP 199627.9% 199728.2% 199825% 199924.6% 200025.3% 200126.1% 200223.7% 200321.9% 200422.4% 200523.7%

42. Productivity Poductivity in manufactıring is divided into 2: a-) Factor Productivity: Real value added / Labor input Real Value added / Capital input This measures only the contribution of one factor of production. It can not differantiate the productivity increase is a result of techncal progress or an increase in other factors. b-) Total Factor Productivity: Residual after the contribution of all factors is removed from output growth.

43. Exports and Manufacturing After ’80 export orientation can be observed easily. Years Export Share of Manufactured Goods 198036% 198979% 200091% Annual Growth Rate of Exports 200019.2% 20017.4% 200211.1% 200316% 200412.5% 20058.6%

45. Export – Productivity Relation After CU membership, excluding agricultural goods, Turkey’s share of manufactured goods in exports increased. Krueger (1982): Productivity growth is faster in period of liberalization. Robinson (1984): Manufacturing productivity increases with periods of export expansion. World Bank Report: Industries remarked as as export oriented grew faster both in production and productivity.

47. Productivity After 1980 We can divide post 1980 period into 3: 1981 – 1989: An increase in real wages resulting in TFP increase. 1989 – 1996: Two forces for TFC increase: a-) Increases in real wages due to populism in elections. b-) Capital account liberalization ’94 crisis is a huge problem in this period. If we exclude the effects of this crisis we can see that TFC growth rate is 9,5% per annumbetween 1989 and 1993.

48. Productivity After 1980 Post 1996 Period: With the CU membership TFP is increasing thanks to the more export oriented manufacturing sector. A huge increase in ’97 can be observed but crises in ’98 and ’99 offset the effect of CU. As we can see the CU didn’t effect TFP much but labor productivity increased a lot thanks to capital accumulation. As we can see TFP and labor productivity doesn’t show a high correlation. This can be given as a proof for the human capital insufficiencies. We haven’t analyzed the capital productivity in manufacuring sector because sector couldn’t internalize the technological progress very well and variability in incentives caused variations in capital flows.

49. Technological Progress Before 1990 technological progress is not very fast especially before 1985.Most remarkable technological progress could be observed between 1993 and 1995 for Turkish manufacturing sector. After the peak in 1995 technological progress slowed down and faced the bottom levels in 2000. After 2001 we again see increase in technology level. Studies show that the TFP in Turkish manufacturing sector is mostly motivated by technological progress, not by labor or capital productivity. Average Annual Growth Rate 1980-199016.60% 1990-199567% 1995-2000<0 2000-200240%

51. As we can see labor productivity has increased very much between ’89 and ’06 but this productivity increase can be attributable to the unregistered employment in Turkey. Also labor productivty in Turkish Manufacturing sector is mostly related with capital accumulation.

52. Employment – Capital Capital / Labor ratios have increased by 84% since 1984. Especially in recent years this increase is much more remarkable due to foreign capital inflows since 2002. According to Yeldan (2006) the job opportunities created by capital inflows is almost negligible. So unemployment rate for Turkey couldn’t be decreased below 10%.

53. SERVICES

54. What are included in the services sector? Transportation Tourism Communication Construction Insurance Finance IT Patent and copyrights commissions Commerce Technique services Personal, cultural, educational and public services

56. Growth Rate of Services in Recent Years Years Growth Rate of Services 19967.8% 19976.9% 19983.1% 1999-2.9% 20006.6% 2001-6.2% 20027.3% 20036.4% 20048.3% 20056.5%

57. Share of Services in GDP in Recent Years Years Share Of Services in GDP 199654.7% 199756.7% 199856.5% 199959.4% 200059.4% 200161.1% 200263.3% 200364.7% 200464.7% 200564.5%

58. Share of the Services in Employment Source: www.dpt.gov.tr Source: www.hazine.gov.trwww.dpt.gov.trwww.hazine.gov.tr Note 1 : The rates are 15% and 19% in 1962 and 1967 respectively. Note 2 : The red column of the chart on the left is construction excluded. YearsShare (%) 200040.1 - 46.5 200139.7 - 44.9 200242.1 - 46.6 200343.4 - 47.9 200443.0 - 47.7 200545.8 - 51.1 200647.3 - 53.0 YearsShare (%) 1972-197425.6 1975-197928.8 1980-198432.3 1985-198935.6 1990-199437.6 1995-200039.7

59. Share of Services in Employment in Recent Years Years Share of Services in Employment 199634.3% 199735.1% 199835.9% 199935.8% 200040% 200139.7% 200242.1% 200343.4% 200443% 200545.8%

60. Growth of Employment in Services Sector Between 1972-2000 average growth of employment is 3.5 %. agriculture →services Inability to create enough employment after 1980s is partly responsible for the unemployment with the decline in agriculture After 2000 the rates are lower Period Growth of Employment 1972-19744.23 1975-19794.93 1980-19843.03 1985-19893.41 1990-19942.58 1995-20003.28

61. Employment generation and value added creation is particularly slow in services relative to manufacturing in Turkey which is in contrast to more rapidly developing countries such as Korea Republic and Ireland

62. Labor Productivity in the Services Sector The average rate between 1972-2000 is 1.1% Fluctuations are related to the structure of the sub-sectors : for example in the crisis periods financial sector is affected considerably. Period Growth of LP 1972-19741.97 1975-19790.27 1980-19841.70 1985-19891.18 1990-19941.43 1995-20000.52

63. COMPARISON

64. GDP Shares by Sectors in Selected European Countries For Hungary we have employed 2004 figure

65. Employment Shares by Sectors in Selected European Countries

66. Job creation has been only moderate since 1980, despite relatively strong economic growth

68. Female Participation Rates in Selected European Countries

70. Group Members Özge Sarıgül Hüseyin Keyik Emre Tokgöz Adil Vatansever Onur Yıldırmış Recep Köşker Ceyhun Varol Erdem Emin Akçay Thank you for your attention...