The Effect of Macroeconomic Factors on Informal Employment in Turkey

Informal employment, which affects not only the economic and social development of countries but also the well-being of workers, is seen as a significant global issue that needs to be addressed. Since the second half of the twentieth century, with urbanization, rapid population growth, the acceleration of sectoral transformation, and changes in the production structure, informal employment has become a more pronounced problem for developing countries like ours. The broad scope of informal employment and the diversity of factors influencing this issue make it difficult to address at a micro level. For this reason, the problem is largely attempted to be solved through macroeconomic indicators. In this study, unemployment, inflation, and economic growth, which have become chronic problems for our country, along with the real exchange rate and interest rates, which have frequently dominated the agenda in recent years, were selected as macroeconomic indicators. Quarterly data for the selected variables from 2004 to 2024 were used in our research. The effects of the chosen variables on the informal economy were examined using the ARDL bounds testing approach. According to the long-term findings of the study, the results for variables other than the exchange rate were significant. A 1-unit increase in unemployment, economic growth, and inflation leads to an increase in informal employment by 0.99%, 0.03%, and 0.012%, respectively. On the other hand, a 1% increase in interest rates would reduce informal employment by 0.02%.