Analysis of Production Potential of Textile Sector and Efficiency of Government Incentives in Turkey

Textile sector, as one of the oldest industries of the world, has become a leading sector in economic development of the developing countries both in terms of export, added-value and production process. The sector operating under constantly changing global market conditions is affected by internal and external developments very quickly. In a competitive environment brought about by the global economic life, countries are implementing incentive and subsidy policies which are one of the economic policy instruments. In this context, the objective of this study is to examine the effectiveness of the incentive policies for the textile sector using quarterly data for the period 2001-2015. When empirical evidence obtained through Vector Error Correction Model (VECM) is examined, it is concluded that incentive policies applied for textile industry are consistent with economic expectations.