An analysis of agglomeration economies and their economic impacts in Turkey through the lens of new economic geography approach

The new economic geography approach bringing spatial aspect to the economic analysis has gained importance as a theory based on agglomeration economies and concentration. Determination of agglomeration economies and externalities in regional level provides vital information for developing region-specific policies. The purpose of this study is to analyze the presence of agglomeration economies in Turkish manufacturing industry and their economic effects. The study covers NUTSI and NUTSII level regions of Turkey. The data covering the period between the years 2003- 2008 is obtained from the Annual Business Statistics by TÜ?K (Turkish Statistics Institute) in accordance with NACE Rev. 1.1 classification. As the analysis method, the static panel data analysis method is employed. As a result of the analysis, the types of agglomeration economies and their effects on economic growth are determined both regional level and country-wide for Turkey. The result that localization economies and the Marshallian externalities are powerful all across Turkey is obtained. Additionally, urbanization economies, which appear as the increase of industrial diversity, are observed to have a negative effect on economic growth. Keywords: New Economic Geography, Agglomeration Economics, ManufacturingJEL Codes: C23, L60, R12