Discussion Paper, Turkish Economic Association 2014/2
Recent empirical research in international trade emphasizes the role of the extensive and intensive margin to the export growth. This paper examines the sources of export growth in Turkey. For this purpose, the study decomposes Turkey's export growth into extensive and intensive margins by using two methodologies, the count method and the decomposition method of export growth shares. The intensive margin into price and quantity components is further decomposed in order to evaluate the role of changes in price and changes in quantity. Detailed bilateral trade data, BACI, from CEPII are employed to analyze Turkey's export statistics with 209 countries at the HS-6 level over the period 1998-2011. Additionally, these methods are employed for different categories of goods (final goods and intermediate goods exports). The results suggest that the extensive margin, particularly geographic diversification, plays the most important role in Turkey's total goods export growth. Further, the growth in Turkey's total goods exports is mainly explained by quantity rather than price growth. The results further point out that growth in Turkey's final goods was driven by price growth, whereas growth in intermediate goods exports was mainly explained by quantity growth. Yet the results also suggested that product and geographic diversification of Turkey's have not been fully realized and thus many more opportunities exist for Turkey to expand product range or expand into new markets, which in turn will bring significant benefits in the form of stable, sustainable economic growth.