Evaluation of Turkey's foreign trade structure in terms of vertical specialization and added value

Every country wants to achieve long-term financial stability, economic growth and better living standards in order to achieve a better level of welfare. The increase and growth of the foreign trade market with globalization has increased competition as well as increased the division of labor between countries. In the light of these developments, production has been extensively fragmented between countries internationally and has become a model in which each country specializes in different stages of the vertical production chain. This study aims to examine Turkey's foreign trade structure on a sectoral basis. In this study, in which 44 sectors were examined between 1995 and 2018, the import content of exports, including all sectors, increased from 8.8% to 21% in the period from 1995 to 2018. The 5 sectors with the highest level of imported inputs in 2018 were coke and refined petroleum products, electrical equipment, motor vehicles, trailers and semi-trailers, machinery and equipment, and rubber and plastics. The import content of Turkey's exports was compared with MIST countries and it was determined that import dependency was not high compared to these countries. In the panel data analysis, which examines the factors determining vertical specialization on a sectoral basis, an increase in sectoral exports increases the level of vertical specialization. Sectoral imports, on the other hand, have a negative effect on vertical specialization. The increase in foreign direct investment and industrial design applications has a positive relationship with the vertical specialization level.