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OECD Economic Surveys: Turkey 2014

image of OECD Economic Surveys: Turkey 2014

OECD's 2014 Economic Survey of Turkey examines recent economic developments, policies and prospects. The special chapter looks at structural change in the business sector.

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Fostering inclusive growth by promoting structural change in the business sector

Turkey’s business sector dynamism has underpinned broad-based and inclusive growth in the 2000s. However, the business sector is highly segmented, with modern high-productivity corporations, but also myriad small, less formal and low-productivity entities. This hampers efficient resource allocation and tends to entrench social inequalities. It also makes it difficult to build on-the-job human capital for the large number of low-skilled. This segmentation needs to be overcome to raise productivity in the informal, low-skill and low-productivity sector, and to facilitate resource transfers from low to higher productivity business entities. This ought to be achieved by aligning Turkey’s formal regulatory and tax framework with OECD best practice, rather than through second-best arrangements where non-compliance with rules co-exists with selective subsidies to parts of the formal sector. Labour market and business taxation reforms are particularly important to enable all categories of enterprises to operate flexibly on a rule-based, level playing field and to achieve productivity enhancing and socially inclusive restructuring.

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