Abstract:

Economic growth is critical to increasing and improving the national level of prosperity. A variety of factors have a major influence on economic growth. Industrialization is one of the most important drivers of economic growth. This study examines the validity of Kaldor's first law for Turkey, which emphasizes that industry is the locomotive of economic growth, with quarterly data for the period of 2007Q1-2021Q4. The study first checked the unit roots of the series and examined the effects of a structural break using the unit-root test of Lee and Strazicich (LM). In the analysis performed with the autoregressive distributed lag (ARDL) method, the cointegration relationship between the series was investigated. The empirical results show that the long-term capacity utilization coefficient (RCM) is negative and insignificant. In the short term, it was found that increasing the utilization of production capacity has a positive effect on economic growth. The results suggest that policymakers should give importance to planning to move manufacturing from short-run to long-run development. It is necessary to enact and implement regulations to solve the sector's problems, develop technological infrastructure, and increase production capacity.

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