Investment and Productivity in Regional Development: Analysis of Computable General Equilibrium Model For TRA1 Region

In this study, to investigate the effect of investment and productivity increases on regional development two different policy scenarios were applied by using a computable general equilibrium model . The scenarios have been implemented for TRA1 Level 2 Region (Erzurum-Erzincan-Bayburt) and the data utilized in the study was composed of the actual social accounting matrix for 2016. In the first scenario, the effect of the increase in public and private sector investments and in the second scenario, the effect of the investment increases sourced by the productivity increase has been investigated on the region's employment, added value, average wage and intra-regional consumption values. According to the result of scenario 1, increases in investment would enhance agricultural employment even more, the increase in added value would be less, average wage differential between TRA1 region and other regions would gradually increase and the intra-regional consumption would shift to agricultural products. According to the result of scenario 2, supporting investment increase sourced by increased productivity would enhance non-farm employment even more, the increase in added value would be more, average wage differential between TRA1 region and other regions would gradually decrease and the intra-regional consumption would shift to non-agricultural products. It has been concluded that supporting the investments with increased productivity would be more effective than only investment increases for the region's economy and that the policies increasing productivity should be targeted besides investment increase