The relationship between market structure and productivity in Turkish manufacturing industry

According to economists, there is an inverse relationship between imperfect competition conditions and productivity. This study is based on Schumpeter's Creative Destruction Theory. According to Schumpeter, productivity increases as a result of technological innovations of large firms operating under imperfect competition conditions. In this study, we investigate the effects of market structure (concentration ratio, CR4) on efficiency (total factor productivity, TFP) for the four-digit Turkish manufacturing industry during the period 2003-2014 applying different panel data techniques. There is a significant negative relationship between productivity and market concentration. While the concentration ratio increases, TFP decreases. That is, imperfect competition decreases productivity. Moreover, the relationship between productivity and concentration is not linear. The other results from the study; (i) wages positively affect the productivity through efficiency wage theory. (ii) foreign trade (export and import) has positive effect on the productivity link the information and technology transfer process. (iii) finally economic crises have a negative impact on productivity, as expected. Keywords: Productivity, Market structure, Panel Data Econometrics, Manufacturing Industry