Automotive industry: Economic effects of foreign direct investment in Turkey

ABSTRACT Foreign Direct Investment (FDI) and automobile industry have inseparable relationship. The academic studies reveal that FDI generally has positive effect on employment, human recourses, management training, GDP, productivity, exports and spillover effects on local industry. In this research, the economic effects of Foreign Direct Investments (FDI) on the Turkish Automotive Industry in terms of export, productivity and employment, the topic of concentration in the Turkish automobile industry between 1997 and 2010 and in the world highest 15 automobile producers between 1998 and 2012 have been analyzed. The results show significant FDI contribution to the Turkish automotive industry in all three areas considered. The results found out that foreign direct investment has significant positive effects on Turkish economy. Policy makers should encourage such investments to stimulate the domestic markets. Keywords: Foreign direct investment, automotive industry, motor vehicle, exports, productivity, employment, labor costs, panel data, fixed effects models, random effects models, concentration.