Investment and productivity in regional development: Analysis of computable general equilibrium model for TRA1 region

Within this study investigating the effect of investment and productivity increases in regional development, the application of two different scenarios have been carried out using the computable general equilibrium model. The scenarios have been implemented for TRA1 Level 2 Region (Erzurum-Erzincan-Bayburt) and the data infrastructure of the study is composed of the actual social accounting matrix for 2016. In the first scenario, the effect of the increase in public and private sector investments and in the second scenario, the effect of the investment increases being supported by increased productivity has been investigated on the region's employment, added value, average wage and intra-regional consumption values. According to the result of scenario 1, increases in investment would enhance agricultural employment even more, the increase in added value would be less, average wage differences between TRA1 region and other regions would gradually increase and the intra-regional consumption would shift to agricultural products. According to the result of scenario 2, supporting investment increase with increased productivity would enhance non-farm employment even more, the increase in added value would be more, average wage differences between TRA1 region and other regions would gradually decrease and the intra-regional consumption would shift to non-agricultural products. With the solution of the built model, it has been concluded that supporting the investments with increased productivity would be more effective than only investment increases for the region's economy and that the policies increasing productivity should be focused on besides increasing the investments.