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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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Author Info
Özlem Onaran () (Department of Economics, Vienna University of Economics & B.A.)
Nursel Aydiner-Avsar (University of Utah)

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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 and B.A., 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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Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Onaran, Uzlem, 2002. "Measuring Wage Flexibility: The Case of Turkey before and after Structural Adjustment," Applied Economics, Taylor and Francis Journals, vol. 34(6), pages 767-81, April. [Downloadable!] (restricted)
  2. 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 wp38, Political Economy Research Institute, University of Massachusetts at Amherst. [Downloadable!]
  3. Ozlem Onaran, 2004. "Life After Crisis For Labor And Capital in the Era of Neoliberal Globalization," Working Papers geewp43, Vienna University of Economics and B.A. Research Group: Growth and Employment in Europe: Sustainability and Competitiveness. [Downloadable!]
  4. Ipek Ilkkaracan & Raziye Selim, 2003. "The role of unemployment in wage determination: further evidence on the wage curve from Turkey," Applied Economics, Taylor and Francis Journals, vol. 35(14), pages 1589-1598, September. [Downloadable!] (restricted)
  5. Ebru Voyvoda, A. Erinc Yeldan, 2001. "Patterns of Productivity Growth and the Wage Cycle in Turkish Manufacturing," International Review of Applied Economics, Taylor and Francis Journals, vol. 15(4), pages 375-396, October. [Downloadable!] (restricted)
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  6. Robert A. Lawson & Edward Bierhanzl, 2004. "Labor Market Flexibility: An Index Approach to Cross-Country Comparisons," Journal of Labor Research, Transaction Publishers, vol. 25(1), pages 117-126, January. [Downloadable!] (restricted)
  7. 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 and B.A., Department of Economics. [Downloadable!]
  8. Korkut Boratav & A. Erinc Yeldan & Ahmet H. Kose, 2000. "Globalization, Distribution and Social Policy: Turkey, 1980-1998," SCEPA Working Papers 2000-10, Schwartz Center for Economic Policy Analysis (SCEPA), The New School. [Downloadable!]
  9. Erol Taymaz & Sule Ozler, 2004. "Labor Market Policies and EU Accession: Problems and Prospects for Turkey," ERC Working Papers 0405, ERC - Economic Research Center, Middle East Technical University, revised Mar 2004. [Downloadable!]
  10. Erlat, Guzin, 2000. "Measuring the Impact of Trade Flows on Employment in the Turkish Manufacturing Industry," Applied Economics, Taylor and Francis Journals, vol. 32(9), pages 1169-80, July. [Downloadable!] (restricted)
  11. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May. [Downloadable!] (restricted)
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  12. Harrison, Ann & Hanson, Gordon, 1999. "Who gains from trade reform? Some remaining puzzles," Journal of Development Economics, Elsevier, vol. 59(1), pages 125-154, June. [Downloadable!] (restricted)
    Other versions:
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