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

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Listed author(s):
  • 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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File URL: http://www.tcmb.gov.tr/wps/wcm/connect/TCMB+EN/TCMB+EN/Main+Menu/PUBLICATIONS/Research/Working+Paperss/2013/13-39
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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
Handle: RePEc:tcb:wpaper:1339
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Keywords: intensive margin; extensive margin; labor market exibility; employment protection;

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Find related papers by JEL classification:
  • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
  • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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  1. Christian Merkl & Dennis Wesselbaum, 2011. "Extensive versus intensive margin in Germany and the United States: any differences?," Applied Economics Letters, Taylor & Francis Journals, vol. 18(9), pages 805-808.
  2. 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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  4. Wesselbaum, Dennis, 2016. "The Intensive Margin Puzzle And Labor Market Adjustment Costs," Macroeconomic Dynamics, Cambridge University Press, vol. 20(06), pages 1458-1476, September.
  5. 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).
  6. François Langot & Coralia Quintero-Rojas, 2009. "European vs American Hours Worked: assessing the role of the extensive and intensive margins," Economics Bulletin, AccessEcon, vol. 29(2), pages 530-542.
  7. Ohanian, Lee E. & Raffo, Andrea, 2012. "Aggregate hours worked in OECD countries: New measurement and implications for business cycles," Journal of Monetary Economics, Elsevier, vol. 59(1), pages 40-56.
  8. Chang, Yongsung & Kwark, Noh-Sun, 2001. "Decomposition of hours based on extensive and intensive margins of labor," Economics Letters, Elsevier, vol. 72(3), pages 361-367, September.
  9. Rand, John & Tarp, Finn, 2002. "Business Cycles in Developing Countries: Are They Different?," World Development, Elsevier, vol. 30(12), pages 2071-2088, December.
  10. Shigeru Fujita & Garey Ramey, 2009. "The Cyclicality Of Separation And Job Finding Rates," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(2), pages 415-430, 05.
  11. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  12. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 1039-1073.
  13. Yonsung Chang & Sun-Bin Kim & Kyooho Kwon, 2012. "Individual and Aggregate Labor Supply in a Heterogeneous Agent Economy with Intensive and Extensive Margins," Working papers 2012rwp-48, Yonsei University, Yonsei Economics Research Institute.
  14. Cho, Jang-Ok & Cooley, Thomas F., 1994. "Employment and hours over the business cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 18(2), pages 411-432, March.
  15. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
  16. 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.
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Cited by:

  1. Alexander Herzog-Stein & Patrick Nüß, 2016. "Extensive versus intensive margin over the business cycle: New evidence for Germany and the United States," IMK Working Paper 163-2016, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  2. Temel Taskin, 2014. "GDP Growth in Turkey : Inclusive or Not?," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 14(2), pages 31-64.
  3. Üngör, Murat, 2014. "Some thought experiments on the changes in labor supply in Turkey," Economic Modelling, Elsevier, vol. 39(C), pages 265-272.

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