GOVERNMENT BUDGET DEFICITS, DEFENCE EXPENDITURE AND INCOME DISTRIBUTION: THE CASE OF TURKEY

This paper analyzes the relationship between government budget deficits, defence expenditure and income redistribution among different social-income groups in Turkey for the period 1965-2003. The analysis was based on a five-equation vector auto regressive (VAR) model and impulse response functions (IRFs) derived from the VAR model. The study finds that the deficit as a percentage of GNP has a negative and significant impact on transfer payments as a percentage of GNP. The IRFs indicate that shocks to deficit expenditures as a percentage of GNP (DEFGNP) have statistically significant impacts on defence spending as a percentage of GNP (DSGNP), educational expenditures as a percentage of GNP (EDGNP), health expenditures as a percentage of GNP (HEGNP), and transfer payments as a percentage of GNP (TPGNP). The results derived from this study also indicate that there is a positive and significant relationship between defence spending as a percentage of GNP and deficits as a percentage of GNP. Therefore, defence spending is viewed as a tool for transferring income among different social-income groups and across generations in Turkey for the period 1965-2004. As a result of this, the government can use deficit and defence spending as one of the major instruments to transfer income among different social-income groups and across generations in Turkey.Budget deficits, Defence expenditure, Income transfers, VAR models, Impulse response functions,

Patterns of Productivity Growth and the Wage Cycle in Turkish Manufacturing

In this paper we investigate the distributional consequences of the post-1980 accumulation patterns and technological change in the Turkish manufacturing industries. We utilise two quantitative techniques. First, we make use of the Hodrick-Prescott filter to disintegrate the cyclical variations in productivity growth and wage rates from their respective historical trends, and study the evolution of the wage cycle against the long term productivity patterns in the sector. Next, we decompose the fundamental characteristics of the contributions of productivity growth of the manufacturing sub-sectors to the overall total. Our results suggest very little structural change in the sectoral composition and nature of productivity advances under the post-1980 structural adjustment reforms and outward-orientation, and underscore that the gains in productivity in this period did not materialise as gains in remunerations of wage labour. Contrary to the prognostications of the orthodox theory, the post-1980 export orientation of Turkish manufacturing was not found to lend itself to productivity contributions, and could not be sustained as a viable strategy of 'export-led industrialisation'.