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Intensive Margin and Extensive Margin Adjustments of Labor Market : Turkey versus United States

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  • Temel Taskin

Abstract

In this paper, we document the intensive and extensive margin adjustments of labor market in Turkey and US.We find that both margins are important. More interestingly, the weight of intensive margin adjustment is substantially smaller than that of the extensive margin in both countries. This is robust to using various data sets and methods. Common wisdom and some theory would expect these countries to divert from each other significantly, because they represent two extreme points of labor market exibility with respect to OECD Employment Protection Index. A possible explanation for our empirical result is the sizable informal sector and self employment in Turkey as it might reduce the large hiring and firing costs and encourage firms towards extensive margin adjustment, and high hours per worker which might restrict the intensive margin adjustment, especially during booms.

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Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 1339.

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Date of creation: 2013
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Handle: RePEc:tcb:wpaper:1339

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Keywords: intensive margin; extensive margin; labor market exibility; employment protection;

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  1. Blundell, Richard & Bozio, Antoine & Laroque, Guy, 2011. "Extensive and Intensive Margins of Labour Supply: Working Hours in the US, UK and France," IZA Discussion Papers 6051, Institute for the Study of Labor (IZA).
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  3. Yongsung Chang & Sun-Bin Kim & Kyooho Kwon & Richard Rogerson, 2014. "Individual and Aggregate Labor Supply in a Heterogeneous Agent Economy with Intensive and Extensive Margins," RCER Working Papers 583, University of Rochester - Center for Economic Research (RCER).
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  6. Yongsung Chang & Noh-Sun Kwark, 2000. "Decomposition of Hours Based on Extensive and Intensive Margins of Labor," Econometric Society World Congress 2000 Contributed Papers 1416, Econometric Society.
  7. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 1039-1073, August.
  8. Lee E. Ohanian & Andrea Raffo, 2011. "Aggregate hours worked in OECD countries: new measurement and implications for business cycles," International Finance Discussion Papers 1039, Board of Governors of the Federal Reserve System (U.S.).
  9. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
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  11. Rand, John & Tarp, Finn, 2002. "Business Cycles in Developing Countries: Are They Different?," World Development, Elsevier, vol. 30(12), pages 2071-2088, December.
  12. Harun ALP & Yusuf Soner BAŞKAYA & Mustafa KILINÇ & Canan YÜKSEL, 2011. "Estimating Optimal Hodrick-Prescott Filter Smoothing Parameter for Turkey," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 26(306), pages 09-23.
  13. Dennis Wesselbaum, 2011. "The Intensive Margin Puzzle and Labor Market Adjustment Costs," Kiel Working Papers 1701, Kiel Institute for the World Economy.
  14. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
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Cited by:
  1. Temel Taskin, 2014. "GDP Growth in Turkey : Inclusive or Not?," Working Papers 1408, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.

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