turkey trade ungor

7/27/2019 Turkey Trade Ungor

1/14

Dynamic Changes in Comparative Advantage in

Turkey: Some Observations

Murat Ungor

January 29, 2011

Abstract

I investigate two aspects of the dynamic changes in Turkeys trade structure. First,I examine the development stages of Turkey from a revealed comparative advantageperspective calculating the specialization indices (the ratio of trade balance to tradevolume) for its major industries. I nd that Turkey became a young NIE (newly in-dustrialized economy) in 1981, when the specialization index of other manufacturessurpassed that of primary commodities. Subsequently, she attained the mature NIEstage in 2001, when the specialization index of machinery also overtook that of pri-mary commodities. Second, I study extensive margin of trade, which refers to the ob-servation of the emergence of previously non-traded products. The share of the least-traded goods in total trade increased gradually and continuously over time. Duringthe period, 1985-1993, the extensive margin in exports grew from 10 percent to about19 percent. Thereafter the growth was faster and increased to about 37 percent in 2005.Similarly, the extensive margin of imports grew from 10 percent in 1985 to about 33percent in 2005.

JEL Classication:F14, O10.Key Words: Turkey, dynamic comparative advantage, extensive margin of trade.

The views expressed herein are those of the author and not necessarily those of the Central Bank of theRepublic of Turkey.

Research and Monetary Policy Department, Central Bank of the Republic of Turkey, Istiklal Caddesi 10,Ulus, 06100 Ankara, Turkey. E-mail address: [email protected]


2/14


3/14


4/14

2 Dynamic Changes in Comparative Advantage

2.1 Specialization Indices

I conduct an exercise in which I compute the specialization indices of Turkey using one-digit SITC codes. For a particular industry, the specialization index is dened as its trade balance divided by the volume of two-way trade, with a higher value implying strongerinternational competitiveness for the industry concerned. Following Kwan (1994), a coun-trys comparative advantage structure (as revealed by its trade structure) can be classiedinto one of four categories based on the relative magnitude of the specialization indicesof the countrys primary commodities (SITC Rev. 2, sections 0 - 4), machinery (SITC Rev.2, section 7, a proxy for capital-and-technology-intensive products), and other manufac-tures (SITC Rev. 2, sections 5, 6, 8, 9, a proxy for labor-intensive products).

A country typically passes from one category to another in the following sequence:(i) the developing country stage, with primary commodities more competitive than othermanufactures and machinery; (ii) the young NIE stage, with other manufactures becom-ing more competitive than primary commodities, which maintains its lead over machin-ery; (iii) the mature NIE stage, with machinery overtaking primary commodities whileother manufactures maintain their overall lead; and (iv) the industrial country stage, withmachinery overtaking other manufactures, which maintain their lead over primary com-modities. Figure 2 shows the development of Turkeys trade structure between 1961 and2009 in terms of broad sectors of merchandise trade.

1961 1967 1973 1979 1985 1991 1997 2003 2009-1.00

-0.75

-0.50

-0.25

0.00

0.25

0.50

0.75

1.00

PrimaryMachineryOther Manufactures

Figure 2: Stages of Turkeys Trade Structure, 1961-2009

3


5/14

Figure 2 exhibits that Turkey became a young NIE in 1981, when the specializationindex of other manufactures surpassed that of primary commodities. Subsequently, sheattained the mature NIE stage in 2001, when the specialization index of machinery alsoovertook that of primary commodities. If the current trend in the sectoral specialization

indices continues, the specialization index of machinery may overtake that of other man-ufactures in the near future.

2.2 Trade in New Products

Hummels and Klenow (2005) and Kehoe and Ruhl (2009) decompose the growth of indi-vidual countries trade into that part due to countries exporting new products - what theycall the extensive margin - and that part due to countries exporting more of the sameproducts - the intensive margin.

I study two measures of extensive margin of trade. The rst measure involves com-puting the share of each of the 10 sets of codes in the total exports (imports) of the lastyear of the sample period .3 If the growth in trade occurred at the intensive margin theneach set of codes would retain its one-tenth share in total exports (or imports). If, on theother hand, the growth in trade occurred at the extensive margin then we would see a jump in the share of the least-traded goods. The second measure tracks the evolutionof the least traded set of codes by computing the share of the least-traded goods in totalexports (or imports) for every year of the sample period. This allows us to see the timing

of any changes in the trade of the least-traded goods.The exercises are carried out for exports as well as imports of Turkey. The partnercountry is taken as the rest of the world .4 I explain the methodology for exports. Thesame methodology is used for imports. I take four-digit SITC (Revision 2) bilateral tradedata obtained from United Nations Commodity Trade Statistics Database for the years between 1985 and 2005. There are 785 categories of goods in these data.

First, I rank categories in order of base-year exports, from categories with the smallestamount of trade to the categories with the largest amount. Second, I form ten sets of 10percentile export groups by cumulating export product categories. Third, I calculate the

3I also study 20 sets of codes. The qualitative nature of the results are similar to those I report in the text.The results are available upon request.

4In the Appendix I present the results where I choose China and the United States as partner countriesof Turkey. I choose these two countries since they are the largest two economies in the world in 2005: usingthe new PPP estimates of GDP, the United States remains the largest economy in the world, with a worldshare of 22.5 percent, followed by China with 9.7 percent ( http://siteresources.worldbank.org/ICPINT/Resources/icp-nal.pdf) . Moreover, the share of the United States in Turkeys total export (import) was 6.7(4.6) percent in 2005; and the share of China in Turkeys total export (import) share 0.7 (5.9) percent in 2005(http://www.tuik.gov.tr/yillik/Istgostergeler.pdf ).

4
http://siteresources.worldbank.org/ICPINT/Resources/icp-final.pdfhttp://siteresources.worldbank.org/ICPINT/Resources/icp-final.pdfhttp://www.tuik.gov.tr/yillik/Ist%20gostergeler.pdfhttp://www.tuik.gov.tr/yillik/Ist%20gostergeler.pdfhttp://siteresources.worldbank.org/ICPINT/Resources/icp-final.pdfhttp://siteresources.worldbank.org/ICPINT/Resources/icp-final.pdf


6/14

share of exports in subsequent years accounted for by each set of categories .5

Figure 3 shows the values of the 10 sets of codes in 1985 for Turkish exports to the restof the world. The numbers above each bar in the gure are the number of SITC codesneeded to account for 10 percent of the trade ow and the bars are the fractions of trade

in 2005. The rst 619.36 categories account for 10 percent of exports, for example; the next65.95 categories account for 10 percent of exports; the next 31.19 categories account for10 percent of exports; and so on. The trade data do have the very large positive spike inshare of trade accounted for by the least traded goods even though the movements in theshares of the trade shares of the highest nine sets of goods are not uniform.

619.36

65.95

31.19

24.98 15.38

9.31 5.00

8.04

3.56

2.22

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0

Cummulative fraction of 1985 export value

F r a c

t i o n

o f 2 0 0 5 e x p o r

t v a

l u e

Figure 3: Composition of Exports: Turkey to the Rest of the World

Figure 3 shows that the largest increases in the share of exports occur for those sets of categories that accounted for the smallest amount of trade in 1985. The 619.36 smallestcategories of exports from Turkey to the rest of the world accounted for 10 percent of

exports in 1985, but in 2005 these same 619.36 categories accounted for 36.50 percent of exports.5I arrange the SITC codes in an ascending order of their value of exports in the rst year of the sample.

For each SITC code, I express the value of its exports as ratio of total exports in the initial year. I then cumu-late the codes to form sets representing one-tenth of total exports getting 10 sets of codes, each consistingof a smaller number of codes. Some sets comprise of non-integer number of codes. The reason is that inorder to make these sets account for exactly 10 percent of total trade, some SITC codes had to be split. Thisis done by splitting the last code added to the set such that the set accounted for exactly 10 percent of trade.The residual value of that code formed the beginning of the next set.

5


7/14

Figure 4 depicts the evolution, over the period 1985-2005, of the export shares of theset of categories least traded in 1985. The share of the least-traded goods in total exportsincreased gradually and continuously over time. During the period, 1985-1993, the exten-sive margin grew from 10 percent to about 19 percent. Thereafter the growth was faster

and increased to about 37 percent in 2005.In sum, the goods exported from Turkey that were the least traded in 1985 account for

a disproportionate portion of growth in trade indicating the expansion in export varieties.

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

1985 1989 1993 1997 2001 2005

Year

F r a c

t i o n

o f t o t a l e x p o r

t v a

l u e

least traded goods in 1985

Figure 4: Exports: Turkey to the Rest of the World, 1985-2005

I have similar observations for imports of Turkey. Figure 5 shows that the largestincreases in the share of imports occur for those sets of categories that accounted for thesmallest amount of trade in 1985. The 600.15 smallest categories of imports of Turkey fromthe rest of the world accounted for 10 percent of imports in 1985, but in 2005 these same600.15 categories accounted for 33.29 percent of imports. Figure 6 depicts the evolution,

over the period 1985-2005, of the import shares of the set of categories least traded in 1985.The extensive margin grew from 10 percent in 1985 to about 33 percent in 2005.

6


8/14

0.340.340.66

5.29

10.57

15.1325.14

41.13

85.25

600.15

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0

Cummulative fraction of 1985 import value

F r a c

t i o n o

f 2 0 0 5 i m p o r t v a

l u e

Figure 5: Composition of Imports: Turkey from the Rest of the World

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

1985 1989 1993 1997 2001 2005

Year

F r a c

t i o n o

f t o t a l i m p o r t v a

l u e


Figure 6: Imports: Turkey from the Rest of the World, 1985-2005

7


9/14

3 Concluding Remarks

I have studied some aspects of the international trade data for Turkey. Future studiesshall be concerned with determining the effects of the dynamic changes in Turkish com-

parative advantage on economic growth and productivity (the long-term driver of percapita income) since questions relating to productivity and international competitivenessremain prevalent in public policy discussions.

One area for further research is gaining a deeper understanding of the heterogeneityand trade reconciling trade theory with empirical features of micro data on plants andrms (see, for example, Redding 2010 for a very recent review).

Appendix A

Table A.1: SITC Codes and Descriptions

SITC Code SITC Description

0 Food and live animals

1 Beverages and tobacco

2 Crude materials, inedible, except fuels

3 Mineral fuels, lubricants and related materials

4 Animal and vegetable oils, fats and waxes

5 Chemicals and related products, n.e.s.

6 Manufactured goods classied chiey by material

7 Machinery and transport equipment

8 Miscellaneous manufactured articles

9 Commodities and transactions not elsewhere classied

8


10/14

654.18

17.09

3.98

5.994.12

2.52

0.36 0.25 0.25

1.25

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0


F r a

c t i o n

o f 2 0 0 5 e x p o r

t v a

l u e

Figure A.1: Composition of Exports: Turkey to the United States

0.00

0.10

0.20

0.30

0.40

0.50

0.60

1985 1989 1993 1997 2001 2005

Year

F r a c

t i o n


t v a

l u e


Figure A.2: Exports: Turkey to the United States, 1985-2005

9


11/14

670.88

40.44

20.10

9.28

6.014.16 2.33 0.93

1.591.28

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0


F r a c

t i o n o

f 2 0 0 5 i m p o r t v a

l u e

Figure A.3: Composition of Imports: Turkey from the United States

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

0.55

0.60

1985 1989 1993 1997 2001 2005

Year

F r a c

t i o n o


l u e


Figure A.4: Imports: Turkey from the United States, 1985-2005

10


12/14

496.92

9.170.35 0.35

0.290.19 0.19 0.19 0.19 2.19

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0


F r a

c t i o n

o f 2 0 0 5 e x p o r

t v a

l u e

Figure A.5: Composition of Exports: Turkey to China

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1985 1989 1993 1997 2001 2005

Year

F r a

c t i o n


t v a

l u e


Figure A.6: Exports: Turkey to China, 1985-2005

11


13/14

679.28

6.76

0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0


F r a c

t i o n o

f 2 0 0 5 i m p o r t v a

l u e

Figure A.7: Composition of Imports: Turkey from China

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1985 1989 1993 1997 2001 2005

Year

F r a c

t i o n o


l u e


Figure A.8: Imports: Turkey from China, 1985-2005

12


14/14

References[1] Hummels, David, and Peter J. Klenow. 2005. The Variety and Quality of a Nations

Exports. American Economic Review, 95(3): 704-23.

[2] Kehoe, Timothy J., and Kim J. Ruhl. 2009. How Important is the New Goods Mar-gin in International Trade. Federal Reserve Bank of Minneapolis Research Depart-ment Staff Report 324.

[3] Kwan, C. H. 1994. Economic Interdependence in the Asia-Pacic Region: Towards a YenBloc. New York: Routledge.

[4] OECD. 2010. SITC Revision 2, International Trade by Commodity Statistics(database). doi: 10.1787/data-00055-en (Accessed on 10 November 2010).

[5] Redding, Stephen J. 2010. Theories of Heterogeneous Firms and Trade.http://www.princeton.edu/ reddings/papers/hetrmstrade 110310.pdf

[6] The United Nations Statistics Division . United Nations Commodity Trade Statis-tics Database.

[7] The World Bank. 2010. World Development Indicators,http://databank.worldbank.org/ddp/home.do (Accessed on 12 November 2010).

13
http://localhost/var/www/apps/conversion/tmp/scratch_5/10.1787/data-00055-enhttp://www.princeton.edu/~reddings/papers/hetfirmstrade_110310.pdfhttp://www.princeton.edu/~reddings/papers/hetfirmstrade_110310.pdfhttp://www.princeton.edu/~reddings/papers/hetfirmstrade_110310.pdfhttp://databank.worldbank.org/ddp/home.dohttp://databank.worldbank.org/ddp/home.dohttp://www.princeton.edu/~reddings/papers/hetfirmstrade_110310.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/10.1787/data-00055-en

turkey trade ungor

Documents