The impact of specilzation and diverfication in foreign trade on rowth: An analysis on Turkey

Within the framework of the classical economic approach, foreign trade has a very important place in the growth and development processes of countries. The growth and development preferences of national economies are determinative on foreign trade specialization and product diversity. Companies that manufacture and export products that are specialized in a country gain a competitive advantage in the market against other companies in this field. The increase in the diversity of the specialized product also brings a competitive advantage to the companies in foreign trade and the countries in which these companies operate. Since Turkey used the closed economy model in the field of foreign trade until the 1980s, it could not reach great economic figures in the field of import-export. With the implementation of neo-liberal economic policies and the adoption of the open economy model in the country in 1980, foreign trade showed an increasing rate of development over the years. While the ratio of exports to imports was 6% at the beginning of the 1980s, it is seen that this ratio increased to 56% in the 2010s. In addition, the developments in the export of products specialized in foreign trade contributed to the growth of the country's economy.In this study, the effects of Turkey's specialization and diversity in foreign trade on economic growth were analysed with the ARDL model for the period 1995-2021. The effect of specialization in foreign trade and diversity on growth in Turkey is the aim of this study. The dependent variable of the model created is Gross Domestic Product (GDP), and the independent variables are Export Indices (Specialization and Diversity Index), Labor Efficiency, Capital Stock, Capital Index, which are important factors affecting Turkey's economic structure and foreign trade. In the study, there is a positive long-term significance between the dependent variable Gross Domestic Product and the independent variables Labor Efficiency, Capital Stock and Export Diversity Index. No long-term significance was found among other variables. When the effect of explanatory variables on Gross Domestic Product is examined, it is seen that Labor Productivity variable has the greatest effect. Keywords: Foreign Trade, Specialization, Diversity, Turkish Economy, Economic Growth