An Empirical Analysis of the Relationship between Research and Development Expenditures, Total Factor Productivity, and Economic Growth in Turkey
Hamza Çeştepe, Sezin ŞıklıMany studies have been conducted on the sources and effects of economic growth and its relationship with various macroeconomic variables. In this study, the relationship between research and development (R&D) expenditures, total factor productivity, and economic growth has been empirically investigated in the case of Turkey. Turkey’s 1990–2019 period data and the Granger causality analysis method were used for this purpose. The analysis discovered a one-way causality relationship between R&D expenditures and growth as well as between R&D expenditures and total factor productivity. In this context, Turkey should focus on policies that prioritize R&D and increase R&D expenditures. Furthermore, given that increases in total factor productivity boost growth, policymakers should implement policies that increase resource efficiency and R&D, and encourage the private sector to invest in these areas through tax breaks, financial incentives, and technical assistance.
Ar-Ge Harcamaları, Toplam Faktör Verimliliği ve Ekonomik Büyüme İlişkisi: Türkiye Üzerine Bir Ampirik Analiz
Hamza Çeştepe, Sezin Şıklıİktisadi büyümenin kaynakları ve etkileriyle birlikte, çeşitli makroekonomik büyüklüklerle ilişkisi de geçmişten günümüze birçok çalışmaya konu olmuştur. Bu çalışmada Ar-Ge harcamaları, toplam faktör verimliliği ve ekonomik büyüme arasındaki ilişki, Türkiye örneğinde ampirik olarak araştırılmıştır. Bu amaçla, Türkiye’nin 1990-2019 dönemi verileri ve Granger nedensellik analizi yöntemi kullanılmıştır. Yapılan analiz neticesinde, Ar-Ge harcamaları ile büyüme ve Ar-Ge harcamaları ile toplam faktör verimliliği arasında tek yönlü nedensellik ilişkisi bulunmuştur. Bu ilişkilerin yönünün ise Ar-Ge harcamalarından büyümeye ve Ar-Ge harcamalarından toplam faktör verimliliğine doğru olduğu sonucuna ulaşılmıştır. Bu bağlamda, Türkiye’nin Ar-Ge’ye önem veren ve Ar-Ge harcamalarını arttırıcı yönde politikalara ağırlık vermesi gerekmektedir. Bunun yanında, toplam faktör verimliliğindeki artışların da büyümeyi olumlu yönde etkilediği göz önüne alındığında, politika yapıcılar Ar-Ge yatırımlarıyla birlikte kaynak verimliliğini artırıcı politikaları da bizzat uygulamaya geçirmeli ve vergi kolaylıkları, finansal ve teknik desteklerle özel sektörü bu konularda teşvik etmelidir.
When economic growth is sustained, it improves the welfare of the country’s citizens by increasing per capita income. As a result, the sources of growth or factors that increase growth have been a topic of interest from the past to the present. Along with an increase in production factors, technological development is one of the most important sources of growth. Some indicators influence technological development. These indicators also include total factor productivity and R&D expenditures.
Total factor productivity, defined as the increase in productivity across all production factors, is the primary source of longterm growth. In order to achieve development by ensuring stable growth, firms must increase resource e technology, particularly in developing countries. Technology is discovered and developed in the economy due to R&D activities. R&D activities are regarded as the foundation for the production and dissemination of new information; technological advances obtained in this manner also positively impact economic growth by increasing the efficiency of production factors and lowering production costs. Indeed, because R&D activities incur costs, spending is required to cover these costs. The ratio to gross national product of this size, technically expressed as “R&D expenditures,” is regarded as one of the most important indicators of countries’ importance on science and technology today.
In the literature, the number of studies on Turkey, particularly in recent years, on the relationship between total factor productivity, R&D investments, and growth has been increasing. However, studies on the relationship of these two factors with growth have been conducted separately. The effect of R&D expenditures and total factor productivity, which are two interrelated concepts on economic growth, has never been studied. In this context, this study aims to fill this gap in the literature by empirically revealing the relationship between these three variables in the Turkish example.
The Granger causality method is used in the study to test the effect of R&D expenditures and total factor productivity on growth using annual data from 1990 to 2019. The improved Augmented Dickey–Fuller (ADF) unit root test assesses its stationarity. The vector autoregressive model is established after performing other necessary tests, such as autocorrelation, stability, and heteroskedasticity tests. Moreover, the existence and direction of the causality relationship between the variables are investigated using the Granger causality test.
According to the Granger causality test, the prediction results for the three models are examined separately. The relationship between R&D expenditures, growth, and total factor productivity with other variables as dependent variables is analyzed, respectively. The following analysis results were obtained regarding the direction of the relationship between R&D expenditures, growth, and total factor productivity: R&D expenditures and growth have a unidirectional causality relationship. The direction of this causality relationship is from R&D expenditures to growth. In this context, the study findings are comparable to those of Altın and Kaya (2009), Korkmaz (2010), Genç and Atasoy (2010), as well as Duman and Aydın (2018). Meanwhile, R&D expenditures and total factor productivity have a unidirectional causality relationship. The direction of this relationship is from R&D expenditures to total factor productivity. This result is consistent with the results of Guellec and van Pottelsberghe de la Potterie (2001), Voutsinas and Tsamadias (2014), as well as Aydın and Yalçınkaya (2016). There is no evidence of a causal relationship between total factor productivity and growth. This result is consistent with the studies by Aksu (2017) as well as Bozkurt and Toktaş (2018).
This study’s results reveal that R&D expenditures increased growth in Turkey during the period examined. Similarly, R&D expenditures positively affected the total factor productivity. In this context, it can be inferred that Turkey’s increase in R&D expenditures during the specified period had a positive impact on growth and total factor productivity.
Today, R&D studies are one of the most important tools for countries to gain a competitive advantage. The primary requirement for conducting R&D studies is the availability of the necessary financial resources. Another critical issue is the training of qualified personnel in this field. Therefore, social awareness about the importance of producing and developing technology should be raised and well-equipped personnel in the field of R&D should be trained. Subsequently, the necessary resources should be allocated for R&D, with increasing the amount of this resource from year to year becoming one of the primary goals. In this context, although it is encouraging that Turkey’s R&D expenditures as a percentage of gross domestic product have recently increased above 1%, it is still quite low compared to developed countries. To increase this share even further, the government should try to provide the necessary resources and incentives and regulations so that the private sector can participate in R&D activities more effectively
