Tourism and De-industrialization: The Case of Turkey

Abstract

The current understanding of economic growth is largely based on the neoclassical growth model developed by (Solow, 1956) that emphasis on capital accumulation as an important factor to support economic growth. The increase in production depends on the increase in the amount of capital or capital accumulation per worker, which causes an increase in production per worker. The technology factor was added to (Solow, 1956) model by (Romer, 1990) and (Lucas, 1988) which emphasized on structural technological change. So that industrialization is one of the most important factors to reduce poverty and supporting long run growth. Therefore, industrialization plays a important role, especially for developing countries. One of the factors that can cause deindustrialization or weakening of the industrial sector is the increase in the tourism sector. The deindustrialization process in the economic literature is known as the Dutch Disease or Beach Disease (in tourism sector). The aim of this study is to investigate whether the growing tourism sector in Turkey has caused resource movement and a spending effect that have led the Turkish economy to experience the Dutch or Beach disease after 2000. For analysis several methods, such as Non- ARDL bounds tests and cointegration methods (such as Dinamik OLS ve Johansen ve Juselius) are employed. Empirical evidence demonstrates that due to the growth of the tourism sector, the Turkish economy is suffering from symptoms of Beach Disease, such as resource movement and spending effect which lead Turkish economy to de-industrialisation.