Category Archives: turkey

Ballots, Blocks, and Bullets (and Bulldozers) – The Vote in Eastern Turkey

Since the referendum last Sunday, there has been much discussion over the relatively high support for the YES-vote in Turkey’s predominantly-Kurdish Eastern part of the country. To give a quick visualization of it, the below graph on the left-hand side shows the difference between the number of YES votes in the referendum and the number of AKP votes in the last (November 2015) parliamentary election, by geographic (NUTS-1) regions. (These numbers are not official data so maybe updated slightly).

The largest increase can be observed in Southeast Anatolia, but Central East and Northeast Anatolia are also among the top regions where the AKP(‘s amendments) gained the largest increase in votes. These three Anatolian regions added circa 570,000 votes (the smaller number reported in my previous post is from narrower subset of provinces) corresponding to ca 38% of the added votes nationally. This is especially noteworthy given that this area corresponds to just under 15% of the electoral population.

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The Curious Case of the Vanishing Never-AKPers in Southeastern Turkey

There are a number of striking features of Sunday’s referendum in Turkey, which resulted in a narrow victory (51.4% being the official “YES” vote share at the time of writing this blog post) for the constitutional amendment proposed by the government.

There are, however, numerous challenges to the result, both with regards to the environment in which it was carried out as well as more direct accusations of election-day irregularities. Going through the election data is probably going to keep many people busy for the next couple of days weeks months. For now, I wanted to highlight one particular phenomenon which struck me as interesting.

At a first glance, when plotting the vote share distribution of the YES vote at the ballot box level was that the “Never-AKPers” were gone. These Never-AKPers are voting groups that have extremely few or literally zero votes for the AKP. In past elections, they have been quite noteworthy. The below illustrates this by plotting the distribution of the AKP vote shares for the 2011, June 2015, and November 2015 parliamentary elections and in the bottommost graph the YES vote share in Sunday’s referendum.

bbdistr

Essentially, the fat left tail (i.e. the ballot boxes with next to zero AKP votes), which stands out in the previous three elections is almost entirely gone in 2017. What happened? Did the areas where the AKP was the least popular suddenly have a change of heart?

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Turkey’s purge is accentuating the gender bias in labor markets and increasing the skills gap

A central challenge for the Turkish economy in avoiding falling into a middle-income trap is to achievea shift away from (what the World Bank has labeled) a “know-who” toward a “know-how” economy. The latter implies not just investments in education but also putting a more educated workforce to productive use.

The recently released employment statistics from the Turkish statistical institute showed two worrisome features of how unemployment has evolved over the last year, beyond the headline 1.9 percentage point jump in the unemployment rate from 10.8% in 2015 to 12.7% in 2016.

1) The increase in the unemployment rate is to a significant degree driven by individuals with higher education degrees, a group that experienced a 3 percentage point increase in the unemployment rate (see graph below). In contrast, less educated brackets show more modest upticks in unemployment. Arguably, this is different from a standard economic downturn which would normally affect blue-collar workers to a similar, if not larger, extent than white-collar workers. (Interestingly,  there’s also a 4.2 percentage point increase among vocational high school graduates.)

2) The unemployment rate change between 2015 and 2016 among women is twice the magnitude to that for men: 2.8 versus 1.4 percentage points respectively.  Moreover, this is mostly driven by higher-educated women with at least a high-school degree, and changes in the unemployment rate varying between 3.8-4.8 percentage points.

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Asset prices and Turkey’s revised GDP growth

A curious aspect of the new GDP series (which I’ve covered here, here, and here) coming out of Turkey is the divergence between GDP growth and the stock market. Whereas official GDP statistics shows higher growth during the 2010-2015 period than the preceding six years 2004-2009, the opposite is true for the Turkish stock market.

This can be seen from the data series published by Turkstat called “The Rates of Financial Investment Real Profits’, which tracks the real returns of not just an investment in the flagship BIST100 equity index of the Borsa Istanbul, but also investments in US dollars, the Euro, Gold, Government debt, as well as bank deposits.

The below graph shows real (inflation-adjusted) return indices for all of these asset classes between January 2004 to January 2017, with the base month set to January 2010.


returns_ts

Whereas in the per-2010 period, equities was the asset class that yielded the highest return (the blue line has the lowest starting point among the series and thus the highest increase up until the base month in January 2010), in the post-2010 period it had the lowest return (the blue line has the lowest end point of all the series). Continue reading →

Will the Real Real GDP in Turkey please stand up?

In the previous two posts on Turkey’s revised GDP statistics I showed 1) how revised GDP growth numbers diverge from the older version after 2009, 2) the importance of construction investments,  and 3) how standard policy variables failed to explain the revised growth figures.

Especially the previous post used cross-sectional data to show that global relationships between policy variables failed to predict Turkish GDP growth. In this post I will take a more direct approach at trying to validate the new official GDP statistics using time-series variation in Turkey. To the extent that Turkey’s revised GDP numbers reflect variation in economic output, there ought to be alternative measures of real output varying in a similar fashion.

One option would be to compare Turkey’s GDP growth with that of a standard leading indicator like industrial production (IP) or retail sales, all three which are published by the Turkish Statistical Institute (Turkstat). Yet the point of the revision appears to have been to improve statistical collection capabilities by using expanded administrative record of firm activity and so on. In this case, any difference between such a series and GDP data could simply reflect differences between recently revised statistics and soon-to-be revised statistics. It is therefore preferable to seek measures of economic output that are less sensitive to changes in Turkstat’s statistical capacity.

The recent debate over the quality of GDP statistics in China is the starting point here. Leaked Wikileaks cables from 2007 showed the now premier of the state council suggesting three alternative measures of economic output instead of the official GDP data: electricity, rail freight volume, and bank loans. Below I make some adjustments to this in order to incorporate factors more specific to the Turkish growth model.

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Is New Turkey’s Growth Model From Outer Space?

The previous post focused the extent to which Turkey’s revised GDP data changed the recent history of economic growth in Turkey. A particularly striking fact of the new series is how much higher the growth rate in GDP in Turkey has been ever since the global financial crisis in 2008/2009. Of interest is then also how this changes Turkey’s economic performance in a comparative sense internationally, both in terms of economic growth as well as key economic indicators.

In this blog post, I take as the basis of economic performance the change in real GDP per capita obtained from the most recent October 2016 World Economic Outlook (WEO) from the IMF. For most of it I will show how this measure of economic growth – in two periods of six-year-averages for 2004-2009 and 2010-2015 respectively – correlates with a selected number of key economic indicators, most of which are included in the WEO database, and how much of Turkey’s (and other countries’) growth can be explained by a relatively simple regression model including a number of indicators of interest.

These indicators are: the natural logarithm of the average GDP per capita during the preceding six-year period, the natural logarithm of the average of population size during the preceding six-year period, the average growth rate in GDP per capita during the preceding six-year period, the current account balance as a % of GDP, the CPI inflation rate, the investment rate as a % of GDP, government debt as a % of GDP, and the unemployment rate. In addition, I also draw on the World Development Indicators database from the World Bank for labor force participation rate, domestic credit  to the private sector as a % of GDP, the age-dependency ratio, the urbanization rate, and from the IMF’s Balance of Payments database I also add the net international investment position (NIIP) as a % of GDP. For the investment rate, private credit, urbanization, and the NIIP-to-GDP measures, I also include a change variable with each measured as the change between the average during one six-year period and the corresponding average of the preceding six-year period. The IMF WEO indicators are quite standard and hopefully require little introduction. Most of added variables from the WDI are a bit Turkey-specific as they will show Turkey’s comparatively low labor force participation rate, the rapid growth of private credit in the economy, and the change in urbanization serving as a proxy for factor that could drive some of the large construction investments apparent in the new revised GDP series for Turkey. Continue reading →

Constructing growth in New Turkey


The Turkish Statistical Institute recently released a revision to its GDP series (here and here), with some noteworthy consequences. Not only did the new series produce an upward revision of the level of GDP by around 20 percent (for GDP in 2015), but equally striking is the upward revision in the real growth rate of GDP after 2009 by an average of 1.8 % per year. The quarterly data is plotted below for new and old GDP and GDP growth rates (year-on-year) respectively.
growth

The new statistics revision, taken at face value, arguably boost “the president’s economic arguments”, putting Turkey’s economy in a kinder light than previously thought. The timing is auspicious, as the government will likely try to revamp the constitution during the coming year.

The changes to Turkey’s GDP and growth rates are very large ones not only from an absolute perspective, but especially so in comparison with other cases of ESA (European standards) or SNA (United Nations standards) revisions. In OECD countries, such revisions have tended to have much smaller impacts on the levels of GDP and, at least on average, close-to zero effects on GDP growth. In most of these other cases, large revisions tend to be driven mostly by the changes in standards themselves, although in some of them, wider changes in how statistics are collected were more dominant. Continue reading →

A few comments on democracy indices and Turkey

I am grateful to the feedback on my previous post, whether it has been in public or in private.

I think of the V-Dem data as an important contribution to how social scientists can measure institutions, and democracy in particular. I do, however, have some thoughts on the V-Dem data and the main other datasets on the same topic as well.

As for the specific time series for liberal democracy in Turkey, one thing that struck me as particularly interesting (and something many others have commented on as well) is the relatively positive trend during most of the 1990s, especially the later part. Given my priors (and many others’) this at first seemed rather counterintuitive. The 1990s were, after all, a period of significant political instability, plagued by recurring economic crises and violent conflicts. How is it possible that a measure of liberal democracy can be increasing during such a period? Continue reading →

The Reversal of (What Little) Liberal Democracy (There Ever Was) in Turkey

Earlier this year, the University of Gothenburg’s V-Dem institute released a new database on democracy. As it turns out, this database yields some new insights on the timing of Turkey’s democratic erosion, a topic I’ve previously covered (here, here, here, here, here, and here).

Here’s how Staffan Lindberg, the director of the V-Dem Institute, described the database to the Washington Post:

“Varieties of Democracy (V-Dem) represents a novel approach to measuring democracy. It is based on collaboration among leading scholars across the world and has two institutional homes: the V-Dem Institute at the University of Gothenburg in Sweden, which also functions as the operational headquarters for the project’s many parts, and the University of Notre Dame in the United States. V-Dem differs from previous datasets by distinguishing among different principles of democracy (as discussed) and offering about 350 unique democracy indicators, 34 indices of various aspects of democracy such as freedom of association, and five main democracy indices for Electoral, Liberal, Participatory, Deliberative, and Egalitarian democracy. These all cover 173 countries, measured annually from 1900 to 2012.”

Frankly, as a political economist (and all-out data nerd, for that matter) I have trouble expressing how exciting this is.

Of particular interest is the measure of liberal democracy, a topic of significant focus both globally (here, here) and specifically for Turkey (see here and here), but I’ll show graphs for the other main components of the V-Dem data as well.

Readers of this blog and my other work will be familiar with my skepticism of the prevailing narrative of the timing of and character of Turkey’s democratic erosion. As I wrote in a recent blog post:

“Given recent crackdowns on freedoms in Turkey, it might be useful with some perspective. Some in the media still seem to be pushing the talking point that Turkey’s “true oppression” began in 2013 after a corruption scandal, contrasting this period with that when AKP was a “beacon of light”, when Turkey was a “vibrant democracy”, and when “Erdoğan’s Turkey” was on the “right path.” Accepting this narrative is a convenient exit for analysts who have overestimated the degree to which Turkey’s democracy was improving during the last decade.”

As it turns out, the data recently provided by V-Dem has something to say about this. Continue reading →

Has the AKP facilitated cronyism through public procurement reforms in Turkey?

This year will mark the three-year anniversary of the Gezi protests which swept across most of Turkey during the summer of 2013. Many things contributed to the protests, but a major a factor in galvanizing such a large segment of the population was undeniably widespread view of severe government overreach in how it used construction to remodel Turkey’s urban landscape after its own design. Several of the so-called ‘crazy projects’ have not only laid bare the degree of government control over construction projects but also that the winners of public procurement projects typically constitute a relatively new niche of business entrepreneurs with strong connections to the AKP. Moreover, it also points to the public procurement sector – and in particular the role of state discretion therein – as the main instrument for this phenomenon.

Today, there are a number of sources pointing to the degree of political connections of public procurement winners in Turkey; ranging from the data visualizations of Mülksüzleştirme Ağları) to rich descriptions of how the political connections of public procurement winners have changed over time in parallell with legal reform giving the government greater say in allocation of contracts. Examples of these include a recent book by Ayğse Buğra and Osman Savaşkan qw well as a forthcoming book by Esra Gürakar (quoted here in the Economist). There are also several informative longer news articles (for example, here, here, and here) on the topic. With the resurgence of conflict in the southeast of Turkey, there are some concern that the Turkish government would confiscate conflict-torn land for the purpose of urban transformation, a process that might very well see government-linked firms gaining most of the contracts.

This begs the question to what extent the increase in AKP-connected firms winning procurement projects is also due to AKP’s changes in the procurement law? Moreover, has this had any economic consequences?

In order to shed light on this, Esra Gurakar and myself have a new paper looking at the effect of state discretion in construction public procurement. Here’s the abstract:

“We investigate whether increased state discretion in public procurement auctions affect economic costs and facilitate favoritism using data from the Turkish construction sector between 2005-2011. After parliament passed a legal amendment to the existing procurement law in 2008, construction auction projects with an estimated cost above a specific threshold became eligible for an auction procedure giving the contracting authority greater control over participating bidders through so-called restricted auctions. Using several identification strategies including difference-in-differences, instrumental variables, and regression discontinuity design, we find that increased discretion in public procurement not only increased costs – in terms of both the winning bid and rebate value – but also increased the likelihood of the winning firm being politically connected to the ruling AKP. Moreover, our analysis further shows that among varying forms of political connections to the AKP, the increased costs are particularly driven by winning firms connected to the two most powerful elites within the AKP during this period, namely individuals in the top political leadership as well as those affiliated with the Gülen movement.”

A noteworthy component here is that the main policy shift we examine occurred back in 2008, around the time when most observers were more focused on portraying the country as a model of Muslim democracy than really trying to understand how reforms were serving to shift power from one poorly accountable center to another.

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