The effects of capital and labor reallocation on total factor productivity in Türkiye, 2000–2024

Abstract

This paper calculates the contribution of the reallocation of capital and labor to aggregate TFP for the 2000–2024 period in the Turkish economy. While the reallocation effect is generally positive for labor (except for crisis years), there are two separate periods for capital. In the period 2000–2014, the reallocation effect for capital is positive, while in the period 2015–2024 it became consistently negative. The paper also takes into account improvements in schooling over time while calculating sectoral TFP growth. Leaving aside the crisis periods of 2000–2002 and 2008–2010, I find that the TFP growth is positive in the 2003–2007 and 2011–2014 periods. However, aggregate TFP growth is almost zero in the 2015–2024 period where there is no economic crisis. TFP growth is very volatile and low on average in the construction sector. The services sector is characterized by negative TFP growth. Agriculture has the smoothest trends and the highest average TFP growth.