IS TURKEY BREAKING THROUGH THE MIDDLE INCOME TRAP? - AN EMPIRICAL INVESTIGATION

The Turkish economy experienced a deep crisis in 2001, followed by implementation of a recovery program mainly designed by a well-respected Turkish economist Kemal Dervis. Despite well-targeted policies, structural reforms and promising outcomes of the recovery program, political parties forming the coalition government lost their seats in the 2002 parliamentary elections and the Justice and Development Party (AKP) came to power with a large majority. The successful program stimulated an impressive growth performance in the following years and most AKP proponents credit a large proportion of this success to AKP's single party government, giving rise to the debate as to whether single party governments are more inclined to generate growth in Turkey. The AKP wing has frequently claimed that single party governance for 14 years has led to significant economic gains in Turkey since 2002, including GDP per capita growth. In this study we attempt to unearth to what extend this argument is in line with the formal results, employing a recently introduced methodology, based on stationarity test. Additionally, the study reveals whether Turkey's economic performance in this period is sufficient to move the country out of the middle income trap. For the analysis we construct a series showing the relative position of the Turkish GDP per capita compared to a wealthy reference economy, namely the US. To this end, we evaluate the relative position of the Turkish GDP per capita for the periods before and after commencement of AKP governance and for the sub-periods of the AKP era between 2002 and 2015. Our findings show that the Turkish economy improved significantly under the single party government in the first two terms of the Justice and Development Party between 2002 and 2011. However, this inclination in performance appears to have lost momentum in recent years.