The Effect of Public and Private Sector Fixed Capital Investments on Gross Domestic Product and Employment in Turkey

Abstract

Purpose: The aim of this study is to analyze the effects of public and private sector investments on gross domestic product (GDP) and employment econometrically with the panel data method in order to determine the efficiency of investments in Turkey. Design/Method/Approach: In the study, the possible effects of public and private sector investments on GDP and employment in Turkey are examined by dividing them into sectors. Sectors are included in the analysis as agriculture and other non-agricultural sectors. Since the data of various sectors within a certain time period are used, time series and horizontal cross-sectional data are analyzed using the panel data method, which allows them to be used together. Four different models are created in the research. Among them, the effects of public investment expenditures on GDP in the period of 2004-2020 in Model 1, private investment expenditures on GDP in the same period in Model 2, public investment expenditures on employment in the period of 2014-2021 in Model 3 and private investment expenditures on employment data in Model 4 are investigated. Findings: The results obtained from the analyses show that public and private sector investments have a significant and positive impact on GDP and employment in Turkey. Practical Implications: It is generally accepted in the public finance literature that investments will positively affect economic growth, production level, employment and regional development if they are used in productive areas. Originality/Value: What makes this study different from others is that the relationship of public and private sector investments with both GDP and employment is analyzed separately. In this way, a comparison can be made from the point of public and private sector investments in Turkey in terms of the contribution of investments to both GDP and employment, and an answer can be sought to the question of how correct the policy of increasing the share of the private sector in investments, especially in recent years, is in Turkey. Research Limitations/Future Research: This study will make a significant contribution to the literature on the economic effects of public and private sector investments. It will be determined how accurate the idea of increasing the share of private investments in Turkey in recent years is. According to the results obtained from the study, new studies will be conducted on what can be done to increase the efficiency of public or private sector investments. Disclaimer: This article was produced from the doctoral thesis prepared by Özgür Mustafa Ömür at Bursa Uludağ University Social Sciences Institute, Department of Finance, under the supervision of Prof. Dr. Filiz Giray. Paper Type: Empirical JEL Classification: E01, E22, E24, H54