Cetin Dogan Levent Gokdemir CMTEA2005

THE ROLE OF KNOWLEDGE AS A NEW PRODUCTION FACTORIN THE ECONOMIC GROWTH OF TURKEY: 

THE ROLE OF KNOWLEDGE AS A NEW PRODUCTION FACTOR IN THE ECONOMIC GROWTH OF TURKEY Cetin DOGAN Levent GOKDEMIR Associate Professor Assistant Professor Murat KARAGOZ Associate Professor Inonu University, Faculty of Economics and Administrative Sciences, Malatya/TURKEY

Slide2: 

Objective of this study is to examine the relationship between KE and economic growth in Turkey. First of all, comparison of Turkey with selected countries in terms of KE will be given. Secondly, by using multivariable time series data on the variables annual logarithmic GNP, schooling, patents, incentives and telephone subscriber numbers we have investigated the existence of a long-run relationship between growth and KE variables. Results have found to be partially supporting the KE hypothesis in that, only schooling variable is turned to be positively effecting the growth.

Slide3: 

Economic theory suggests that transition to knowledge economy leads to increases in total factor productivity and hence economic growth. We have defined Knowledge Economy (KE) as an umbrella concept which comprises well-established Information and Communications Technologies (ICTs), well educated and skilled human capital stock, a high intensity of domestic innovation and technological adoption and the economic and institutional regime to stimulate productivity and economic growth such as incentives.

The Four Pillars of the Knowledge Economy as follows:: 

The Four Pillars of the Knowledge Economy as follows: 1) A suitably organized economic and institutional regime should provide incentives for the efficient use of knowledge 2) Education : A well-educated and skilled population is essential to the efficient creation, acquisition, dissemination and utilization of relevant knowledge, which tends to increase total factor productivity and hence economic growth. While the basic education helps to increase peoples' capacity to learn and to use information, the technical and higher education in engineering and scientific areas are necessary for technological innovation. 3) Innovations: An efficient innovation system of firms, research centers, universities, consultants, and other organizations to tap into the growing stock of global knowledge, assimilate and adapt it to local needs, and create new technology 4) Information and communications technologies (ICTs): A dynamic information infrastructure to facilitate the effective communication, dissemination, and processing of information. Information and communications technologies (ICTs) are the backbone of the knowledge economy and in recent years have been recognized as an effective tool for promoting economic growth and sustainable development.

Slide5: 

Countries, which have transformed their economic structure to KE such as USA, Finland and Ireland, have increased their productivity, global competitiveness and created new jobs. Turkey is a country in the stage of EU full membership. In parallel to this, Turkey has signed Customs Union Agreement with EU in 1996 and Turkey’s almost 60 % of foreign trade is with EU countries. In the context of these findings in order to increase productivity and global competitiveness, Turkey has to transform its economy to KE successfully.

Some KE Indicators in Selected Countries : 

Some KE Indicators in Selected Countries

Slide7: 

Data, Methodology and Empirical Results We have selected four proxies for four legs of knowledge economy as follows. 1-Education: Total number of students in general, (SCH). 2-Innovation: Total number of patents issued to domestic and foreign applicants (PAT). 3-Incentives: Total amount of cash incentives (INC). 4-Information infrastructure: Total number of telephone and mobile subscribers (TEL).

Trend models for variables : 

Trend models for variables

The Results of Unit Root Tests: 

The Results of Unit Root Tests

Cointegration Test Results : 

Cointegration Test Results

Pairwise Granger Causality Tests: 

Pairwise Granger Causality Tests

Knowledge Economy models for Turkey: 

Knowledge Economy models for Turkey

Conclusion: 

Conclusion Economic theory suggests that knowledge leads to increases in total factor productivity and thus economic growth. Experiences of countries, which have transformed their economic structure to KE such as US, Finland and Ireland, have supported this theory. Results found to be partially supporting the KE hypothesis in that, only schooling variable positively effects the growth. A unit changes in logarithmic schooling numbers cause 1.032477 unit increases in logarithmic GNP figures. On the other hand, the relationship between logarithmic patent and GNP variable emerged with a negative sign. This relationship is positive in advanced industrialized countries but was found negative for underdeveloped and developing countries by some studies. The case of Turkey in this regard is similar to the latter group of countries. One reason for this negative relationship could be social, cultural, economic and institutional deficiencies in developing countries.

Slide14: 

It can be suggested that knowledge could become the main engine of growth if the economy satisfies certain preconditions. These preconditions include a sufficiently high level of quality in human capital stock, a high intensity of domestic innovation and technological adoption, well-established information and communications infrastructure, and the economic and institutional regime to stimulate productivity and economic growth.