DETERMINANTS OF SECTORAL PRODUCTIVITY IN TÜRKİYE: THE ROLE OF MARKET CONCENTRATION AND PRODUCTION STRUCTURE

Abstract

This study examines the determinants of sectoral productivity in Turkey within the framework of market concentration, production structure, and macroeconomic factors using a fixed effects panel data model. The study utilizes the Annual Industry and Services Statistics (AISS) dataset from the Turkish Statistical Institute (TÜİK), creating a panel dataset covering 16 sectors at the NACE Rev.2 level for the period 2009–2022. The impact of market concentration on labor productivity is measured using the Herfindahl-Hirschman Index (HHI) and, alternatively, the CR4 concentration index. Capital intensity, employment-dependent sector size, adjusted labor share, and education level variables are used to examine the effect of production structure on productivity. Additionally, exchange rate and interest rate are included in the model as macroeconomic control variables. The empirical findings show that market concentration has a positive and significant effect on both productivity level and productivity growth; capital intensity and education level increase productivity; while labor share has a negative effect on productivity. The concentration-productivity relationship persists even when macroeconomic variables are included in the model. The fact that the CR4 variable, used as an alternative concentration indicator, was found to be statistically insignificant suggests that the sector-level market structure in Turkey can be better represented by more comprehensive concentration indicators such as HHI. This reveals that sectoral productivity differences in Turkey are shaped by the combined effect of market structure, capital-labor mix, and macroeconomic conditions. The findings offer important implications for competition policies, sector-based productivity strategies, and structural transformation policies.