Is it possible to deindustrialize before industrialization? The Turkish case

Abstract

The main focus of the study is to examine the existence of deindustrialization patterns as observed in the Turkish economy in late 90's and continued to date. A common feature of such deindustrialization has been the overvaluation of the domestic currency. While the nominal GDP share of manufacturing industry is decreasing, the sector can has not been able to create sufficient employment increases, and, services sectors confronted a great deal of labor surplus to absorb. After liberalizing its international economic relations in late 80s, Turkish economy frequently suffered from overvalued Turkish lira and faced both financial and balance of payments crises. Together with the overvalued Turkish lira and deindustrialization tendencies, this study analyses the interrelations of these processes. We found that developments in the real exchange rate affect the share of manufacturing in GDP and employment via interim factors such as real wages, productivity and investments.