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Long-Term Capital Goods Importation And Minimum Wage Relationship In Turkey: Bounds Testing Approach

Listed author(s):
  • TASTAN Serkan

    (Cumhuriyet University, Sivas, Turkey)

  • OZEKICIOGLU Halil

    (Cumhuriyet University, Sivas, Turkey)

Registered author(s):

    In order to examine the long-term relationship between capital goods importation and minimum wage, autoregressive distributed lag (ARDL) bounds testing approach to the cointegration is used in the study. According to bounds test results, a cointegration relation exists between the capital goods importation and the minimum wage. Therefore an ARDL(4,0) model is estimated in order to determine the long and short term relations between variables. According to the empirical analysis, there is a positive and significant relationship between the capital goods importation and the minimum wage in Turkey in the long term. A 1% increase in the minimum wage leads to a 0.8% increase in the capital goods importation in the long term. The result is similar for short term coefficients. The relationship observed in the long term is preserved in short term, though in a lower level. In terms of error correction model, it can be concluded that error correction mechanism works as the error correction term is negative and significant. Short term deviations might be resolved with the error correction mechanism in the long term. Accordingly, approximately 75% of any deviation from equilibrium which might arise in the previous six month period will be resolved in the current six month period. This means that returning to long term equilibrium progresses rapidly.

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    File URL: http://eccsf.ulbsibiu.ro/RePEc/blg/journl/10111tastan&ozekicioglu.pdf
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    Article provided by Lucian Blaga University of Sibiu, Faculty of Economic Sciences in its journal Studies in Business and Economics.

    Volume (Year): 10 (2015)
    Issue (Month): 1 (April)
    Pages: 122-129

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    Handle: RePEc:blg:journl:v:10:y:2015:i:1:p:122-129
    Contact details of provider: Postal:
    Lucian Blaga University of Sibiu, Faculty of Economic Sciences Dumbravii Avenue, No 17, postal code 550324, Sibiu, Romania

    Phone: 004 0269 210375
    Fax: 004 0269 210375
    Web page: http://economice.ulbsibiu.ro/
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    1. Hoon, Hian Teck, 2001. "Adjustment of wages and equilibrium unemployment in a Ricardian global economy," Journal of International Economics, Elsevier, vol. 54(1), pages 193-209, June.
    2. Dutt, Pushan & Mitra, Devashish & Ranjan, Priya, 2009. "International trade and unemployment: Theory and cross-national evidence," Journal of International Economics, Elsevier, vol. 78(1), pages 32-44, June.
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    4. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-494, June.
    5. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
    6. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    7. Mark P. Moore & Priya Ranjan, 2005. "Globalisation vs Skill-Biased Technological Change: Implications for Unemployment and Wage Inequality," Economic Journal, Royal Economic Society, vol. 115(503), pages 391-422, 04.
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