Influence of product relatedness on provincial growth: comparative analysis of east–west discrepancies in Turkey

Abstract

Debates on the advantages of regional industrial specialization versus diversification are a central focus in economic theory. Concepts of related and unrelated variety offer a potentially insightful framework to explore this complex issue. This study examined the effects of related and unrelated variety on employment and labor productivity growth for 81 provinces in Turkey using the proximity approach to measure relatedness. We found that only the related variety contributes to regional economic growth in Turkey. When regional disparities between the western and eastern provinces are accounted for, the related variety positively affects employment growth in the western provinces. On the other hand, labor productivity and related variety relationships appear to be valid only for the relatively less developed eastern provinces. These findings have significant implications for economic policies, particularly for nations such as Turkey where regional economic disparities are a major concern. This study underscores the need for a deeper understanding of the intricate dynamics of regional industrial mixes and the roles they play in regional economic growth.