Government policies and behavior exert a strong influence on the investment climate through their
impact on costs, risks and barriers to competition. Key factors affecting the investment climate through their
impact on costs are: corruption, taxes, the regulatory burden and extent of red tape in general, factor markets
(labor, intermediate materials and capital), the quality of infrastructure, technological and innovation
support, and the availability and cost of finance. While the investment climate surveys are quite useful in
identifying major issues and bottlenecks as perceived by firms, the data collected is also meant to provide
the basic information for an econometric assessment of the impact or contribution of the investment climate
(IC) variables on productivity. We believe that improving the investment climate (IC) is a key policy
instrument to promote economic growth and to mitigate the institutional, legal, economic and social factors
that are constraining the convergence of per capita income and labor productivity of Turkey relative to more
developed countries. For that, we need to identify the main investment climate variables that affect
economic performance measures like total factor productivity, employment, wages, exports and foreign
direct investment and this is the main goal of this paper. In turn, that quantified impact is used in the
advocacy for, and design of, investment-climate reforms