Industrialization, structural change and growth dynamics in Turkiye

Abstract

Purpose This study aims to analyze the structural determinants of industrialization and long-run growth in Turkiye, focusing on premature deindustrialization, limited technological upgrading and stagnant productivity as key barriers to escaping the middle-income trap (MIT). Design/methodology/approach A comprehensive system dynamics (SD) model is developed to capture the nonlinear and feedback-driven dynamics of the Turkish economy’s growth processes. Capital accumulation, labor dynamics, technology development, productivity formation and manufacturing performance are jointly modeled within an integrated feedback structure. The model is calibrated for 1989–2019 and used to evaluate alternative long-term development scenarios through 2049. Findings The simulations project an economic recovery over 2019–2027, followed by sustained long-run development through 2049 under an improved policy environment. Despite these favorable projections, addressing persistent structural weaknesses remains critical. Policies that rely primarily on exchange rate depreciation without accompanying improvements in institutional quality yield limited gains, whereas strategies that prioritize institutional reform and align exchange rate policy with sectoral priorities promote economic growth and increase the manufacturing sector’s share of output beyond 20%. Complementing these measures with policies addressing social demands further raises total output by approximately 30% relative to the baseline while preserving manufacturing performance. Overall, the results suggest that an integrated policy mix combining institutional reform, social policies and technology-oriented structural transformation can generate stronger long-run development outcomes than isolated policy interventions. Originality/value This study develops an integrated dynamic framework for analyzing Turkiye’s economic development process by jointly examining input accumulation, productivity dynamics, and structural transformation. It contributes to the growth and development literature by capturing these interconnected mechanisms within a unified feedback structure and providing a simulation-based framework for evaluating alternative development scenarios and policy interventions.

The authors' abstract, as published at the source. International Journal of Development Issues, 2026 · DOI ↗