Total Factor Productivity in Turkey: A Comparative Analysis

Total factor productivity (TFP) is the most commonly used measure of firm performance and a valuable tool for policy making. Although cross-country TFP analyses have been performed by many researchers, lack of homogeneous data sources obstructed conducting conclusive analyses with micro-level datasets. This study compares average TFP performances of Turkish firms and aggregate TFP in Turkey with firms in a group of selected countries using data collected by the World Bank. Data was collected through firm-level surveys that follow a standard methodology. Cross-country comparison of TFP performances shows that there are significant differences between average and aggregate TFP across countries. While aggregate TFP in Turkey ranks high among the peers, the rank of Turkey’s average TFP is lower. Also, relative to the peer group, productivity distribution is more dispersed in Turkey and large firms are more productive than small firms. This finding is consistent across various methodologies implemented to measure TFP. Despite low average productivity in Turkey, there are some industries such as Textile, Chemicals, Basic Metals and Machinery where Turkish firms rank among the top.