Regional Inequality and International Trade in Turkey: a Dynamic Spatial Panel Approach

Abstract

Aim of the present article1 is to investigate the impact of trade liberalization on the evolution of regional income inequalities in Turkey between 2004-2011. Despite the large body of literature on this subject, there exists several directions which needs to be further explored. i. so far in the literature, the concept of trade openness is too broadly defined. However, it is not only ‘trade’ per se that can affect the regional economies but the composition of trade is also of great importance (Rodriquez-Pose and Gill, 2006). Indeed, it can be partitioned into two components, such as exports and imports. We analyze separately the impact of each component on the evolution of regional inequalities. ii. in most of the empirical studies dealing with this issue, neighboring regions are assumed to have no spatial economic interconnection between each other. We, therefore, incorporate spatial spillovers of trade and growth into our analysis. Our results are summarized in two groups: First, regional inequalities in Turkey are quite sizable but tend to decline over the period of analyses. Second, initially poorer regions that experience an export-based liberalization tend to grow faster than richer ones. Imports, on the other hand, have an opposite effect. © 2017, Istanbul Teknik Universitesi, Faculty of Architecture. All rights reserved.