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The controversy over employment policy: Low labor costs and openness, or demand policy? A sectoral analysis for Turkey

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  • Özlem Onaran

    ()
    (Department of Economics, Vienna University of Economics & B.A.)

  • Nursel Aydiner-Avsar

    (University of Utah)

Abstract

The purpose of this paper is to test the effects of labor cost, openness, and demand side variables on employment for the case of Turkey using the panel data of private manufacturing industry at three digit level for 25 sectors for the period of 1973-2001. We use a seemingly unrelated regression (SUR) model, which allows for cross-sectoral heterogeneity. The estimation results show that higher growth is more effective in stimulating employment compared to lower labor costs. The reliance of Turkey and many developing countries on labor market flexibility and openness as the unique tools of employment policy reflects a pro-capital incomes policy bias rather than a necessity. The results confirm the Keynesian emphasis on demand-side policies to fight against unemployment.

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Paper provided by Vienna University of Economics, Department of Economics in its series Department of Economics Working Papers with number wuwp097.

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Date of creation: Aug 2006
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Handle: RePEc:wiw:wiwwuw:wuwp097

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  1. Erol Taymaz & Sule Ozler, 2004. "Labor Market Policies and EU Accession: Problems and Prospects for Turkey," ERC Working Papers, ERC - Economic Research Center, Middle East Technical University 0405, ERC - Economic Research Center, Middle East Technical University, revised Mar 2004.
  2. Ozlem Onaran, 2004. "Life After Crisis For Labor And Capital in the Era of Neoliberal Globalization," Working Papers, Vienna University of Economics Research Group: Growth and Employment in Europe: Sustainability and Competitiveness geewp43, Vienna University of Economics Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
  3. Özlem Onaran & Engelbert Stockhammer, 2006. "The effect of FDI and foreign trade on wages in the Central and Eastern European Countries in the post-transition era: A sectoral analysis," Department of Economics Working Papers wuwp094, Vienna University of Economics, Department of Economics.
  4. Guzin Erlat, 2000. "Measuring the impact of trade flows on employment in the Turkish manufacturing industry," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 32(9), pages 1169-1180.
  5. Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras," NBER Working Papers 5122, National Bureau of Economic Research, Inc.
  6. Ann Harrison & Gordon Hanson, 1999. "Who Gains from Trade Reform? Some Remaining Puzzles," NBER Working Papers 6915, National Bureau of Economic Research, Inc.
  7. Özlem Onaran & Engelbert Stockhammer, 2002. "Two Different Export-Oriented Growth Strategies under a Wage-led Accumulation Regime: à la Turca and à la South Korea," Working Papers, Political Economy Research Institute, University of Massachusetts at Amherst wp38, Political Economy Research Institute, University of Massachusetts at Amherst.
  8. Robert A. Lawson & Edward Bierhanzl, 2004. "Labor Market Flexibility: An Index Approach to Cross-Country Comparisons," Journal of Labor Research, Transaction Publishers, Transaction Publishers, vol. 25(1), pages 117-126, January.
  9. Erinç Yeldan & Ebru Voyvoda, 1999. "Patterns of Productivity Growth and the Wage Cycle in Turkish Manufacturing," Departmental Working Papers, Bilkent University, Department of Economics 9911, Bilkent University, Department of Economics.
  10. Ozlem Onaran, 2002. "Measuring wage flexibility: the case of Turkey before and after structural adjustment," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 34(6), pages 767-781.
  11. Ipek Ilkkaracan & Raziye Selim, 2003. "The role of unemployment in wage determination: further evidence on the wage curve from Turkey," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 35(14), pages 1589-1598.
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Cited by:
  1. Luis N. Lanteri, 2013. "Determinantes económicos del nivel de empleo. Alguna evidencia para Argentina," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 73-100, May.
  2. Djavad Salehi-Isfahani & Insan Tunali & Ragui Assaad, 2009. "A Comparative Study Of Returns To Education Of Urban Men In Egypt, Iran, And Turkey," Middle East Development Journal (MEDJ), World Scientific Publishing Co. Pte. Ltd., World Scientific Publishing Co. Pte. Ltd., vol. 1(02), pages 145-187.
  3. Afþin Þahin & Aysýt Tansel & M. Hakan Berument, 2013. "Output-Employment Relationship Across Sectors: A Long- Versus Short-Run Perspective," Working Papers, Turkish Economic Association 2013/9, Turkish Economic Association.
  4. Herr, Hansjörg & Sonat, Zeynep M., 2013. "Neoliberal Unshared Growth Regime of Turkey in the Post-2001 Period," EconStor Preprints 88606, ZBW - German National Library of Economics.
  5. Herr, Hansjörg & Sonat, Zeynep M, 2013. "Neoliberal unshared growth regime of Turkey in the post-2001 period," ILO Working Papers, International Labour Organization 484126, International Labour Organization.

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