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Sectoral Employment and Labor Costs: Elasticity Evidence on Turkey

Year 2011, Volume: 2 Issue: 2, 15 - 26, 01.07.2011

Çağaçan Değer

https://doi.org/10.18354/esam.81742

Abstract

A recurrent theme in employment policies is that reduction of labor costs would increase employment. This study aims to obtain a value for the employment elasticity of labor cost in Turkey through estimation of a sectoral employment equation. Using 3-digit ISIC Rev 3 industry data obtained from TURKSTAT, the present study performs a panel analysis. The calculated elasticities are positive, contradicting theoretical expectation., and pointing that cost reduction may not be a valid tool for employment expansion. It is also argued that the problem with the sign may be due to the data used and may actually be supportive of a wage curve.

Keywords

Labor cost employment panel analysis

References

  • ADAMS, J. D. (1985). “Permanent Differences in Unemployment and Permanent Wage Differentials” Quarterly Journal of Economics 105:255-284.
  • BALTAGİ, B. H. (1995). Econometric Analysis of Panel Data, John Wiley and Sons LTD.: West Sussex, England.
  • BEHMAN S. (1978). “Interstate Differentials in Wages and Unemployment” Industrial Relations 17: 168-188.
  • BHALOTRA, S. R. (1998). “The Puzzle of Jobless Growth in Indian Manufacturing” Oxford Bulletin of Economics and Statistics, 60(1),
  • BHANDARİ, A. K. AND A. HESHMATİ. (2005). “Labor Use and Its Adjustment in Indian Manufacturing Industries” Institute for the Study of Labor Discussion Paper Series, Discussion Paper No: 1596.
  • BLANCHFLOWER, D. G. AND A. J. OSWALD. (1994). The Wage Curve, MIT Press: Cambridge, Massachusetts.
  • BLANCHFLOWER, D. G. AND A. J. OSWALD (2005) “The Wage Curve Reloaded”, NBER Working Paper 11338.
  • BOWLES, S. AND R. BOYER. (1995). “Wages, Aggregate Demand and Employment in An Open Economy: An Empirical Investigation” in Epstein, Gerald A. and Herbert M. Gintis (eds.) Macroeconomic Policy After the Conservative Era: Studies in Investment, Saving and Finance, Cambridge University Press.
  • FAJNZYLBER, P. AND W. F. MALONEY. (2000). “Labor Demand and Trade Reform in Latin America”, The World Bank Policy Research Working Paper Series No: 2491.
  • GÜRSEL,S., H. LEVENT, E. TAŞTI, A. YÖRÜKOĞLU, A. S. ERÇEVİK AND P. TERCAN. (2002). Türkiye'de İşgücü Piyasası ve İşsizlik, TÜSİAD: İstanbul.
  • HALL, R. E. (1970). “Why is the Unemployment Rate so High at Full Employment?” Brookings Papers on Economic Activity 3: 369-402.
  • HALL, R. E. (1972). “Turnover in the Labor Force” Brookings Papers on Economic Activity 3: 709-756.
  • HAMERMESH, D. S. (1986). “The Demand for Labor in the Long Run” in Orley Ashenfelter and Richard Layard, eds. Handbook of Labor Economics, North-Holland Press: Amsterdam.
  • HAMERMESH, D. S. (1993). Labor Demand, Princeton: Princeton University Press.
  • HAUSMAN, J. A. (1978). “Specification Tests in Econometrics”, Econometrica, 46, pp: 1251-1271.
  • HESHMATİ, A. AND M. NCUBE. (1998). “An Econometic Model of Employment in Zimbabwe’s Manufacturing Industries” SSE/EFI Working Paper 277. (Revised in 2003)
  • HOLDEN, K AND PEEL, D. A. (1979). “The Determinants of the Unemployment Rate: Some Empirical Evidence”, Journal of the Royal Statistical Society. Series D (The Statistician) 28(2), pp. 101-107.
  • HSİAO, C. (2003). Analysis of Panel Data, Cambridge University Press: Cambridge.
  • İLKKARACAN, I. AND R. SELİM. (2003). “The Role of Unemployment in Wage Determination: Further Evidence on the Wage Curve from Turkey” Applied Economics, 35, pp. 1589-98.
  • JOHNSTON, J. AND J. DİNARDO. (1997). Econometric Methods, McGraw-Hill International Editions, Singapore.
  • KUNCE, M. (2006). “What Factors Effect a State’s Manufacturing Employment? Evidence from 1974-1994 State Panel Data” Review of Urban and Regional Development Studies,18(1).
  • KRİSHNA, P., D. MİTRA AND S. CHİNOY. (2000). “Trade Liberalization and Labor Demand Elasticities: Evidence from Turkey” Journal of International Economics 55:391-409.
  • ONARAN, Ö. (2000). “Türkiye'de Yapısal Uyum Sürecinde Emek Piyasasının Etkinliği”, Toplum ve Bilim, 86 (Güz 2000).
  • REZA, A. M. (1978). “Geographical Differences in Earnings and Unemployment Rates” Review of Economics and Statistics 60:201-208.
  • TELLİ, Ç., E. VOYVODA AND E. YELDAN. (2006). “Turkish Economy Under the post-1998 IMF Program: Modeling General Equilibrium for Socially Responsible Macroeconomics”. Bağımsız Sosyal Bilimciler İktisat Grubu Çalışmaları, Internet Site: http://goo.gl/sPTkF Access Date: 31 July 2011.
  • TOPEL, R. H. (1986). “Local Labor Markets” Journal of Political Economy, Supplement, 94: 111-143.
  • WOOLRİDGE, J. M. (2002). Econometric Analysis of Cross Section and Panel Data, MIT Press: Massachusetts, USA.
  • WOOLRİDGE, J. M. (2003). Introductory Econometrics: A Modern Approach, South-Western: Ohio, USA.

Sectoral Employment and Labor Costs: Elasticity Evidence on Turkey

Year 2011, Volume: 2 Issue: 2, 15 - 26, 01.07.2011

Çağaçan Değer

https://doi.org/10.18354/esam.81742

Abstract

A recurrent theme in employment policies is that reduction of labor costs would increase employment. This study aims to obtain a value for the employment elasticity of labor cost in Turkey through estimation of a sectoral employment equation. Using 3-digit ISIC Rev 3 industry data obtained from TURKSTAT, the present study performs a panel analysis. The calculated elasticities are positive, contradicting theoretical expectation., and pointing that cost reduction may not be a valid tool for employment expansion. It is also argued that the problem with the sign may be due to the data used and may actually be supportive of a wage curve.

Keywords

Labor cost employment panel analysis

References

  • ADAMS, J. D. (1985). “Permanent Differences in Unemployment and Permanent Wage Differentials” Quarterly Journal of Economics 105:255-284.
  • BALTAGİ, B. H. (1995). Econometric Analysis of Panel Data, John Wiley and Sons LTD.: West Sussex, England.
  • BEHMAN S. (1978). “Interstate Differentials in Wages and Unemployment” Industrial Relations 17: 168-188.
  • BHALOTRA, S. R. (1998). “The Puzzle of Jobless Growth in Indian Manufacturing” Oxford Bulletin of Economics and Statistics, 60(1),
  • BHANDARİ, A. K. AND A. HESHMATİ. (2005). “Labor Use and Its Adjustment in Indian Manufacturing Industries” Institute for the Study of Labor Discussion Paper Series, Discussion Paper No: 1596.
  • BLANCHFLOWER, D. G. AND A. J. OSWALD. (1994). The Wage Curve, MIT Press: Cambridge, Massachusetts.
  • BLANCHFLOWER, D. G. AND A. J. OSWALD (2005) “The Wage Curve Reloaded”, NBER Working Paper 11338.
  • BOWLES, S. AND R. BOYER. (1995). “Wages, Aggregate Demand and Employment in An Open Economy: An Empirical Investigation” in Epstein, Gerald A. and Herbert M. Gintis (eds.) Macroeconomic Policy After the Conservative Era: Studies in Investment, Saving and Finance, Cambridge University Press.
  • FAJNZYLBER, P. AND W. F. MALONEY. (2000). “Labor Demand and Trade Reform in Latin America”, The World Bank Policy Research Working Paper Series No: 2491.
  • GÜRSEL,S., H. LEVENT, E. TAŞTI, A. YÖRÜKOĞLU, A. S. ERÇEVİK AND P. TERCAN. (2002). Türkiye'de İşgücü Piyasası ve İşsizlik, TÜSİAD: İstanbul.
  • HALL, R. E. (1970). “Why is the Unemployment Rate so High at Full Employment?” Brookings Papers on Economic Activity 3: 369-402.
  • HALL, R. E. (1972). “Turnover in the Labor Force” Brookings Papers on Economic Activity 3: 709-756.
  • HAMERMESH, D. S. (1986). “The Demand for Labor in the Long Run” in Orley Ashenfelter and Richard Layard, eds. Handbook of Labor Economics, North-Holland Press: Amsterdam.
  • HAMERMESH, D. S. (1993). Labor Demand, Princeton: Princeton University Press.
  • HAUSMAN, J. A. (1978). “Specification Tests in Econometrics”, Econometrica, 46, pp: 1251-1271.
  • HESHMATİ, A. AND M. NCUBE. (1998). “An Econometic Model of Employment in Zimbabwe’s Manufacturing Industries” SSE/EFI Working Paper 277. (Revised in 2003)
  • HOLDEN, K AND PEEL, D. A. (1979). “The Determinants of the Unemployment Rate: Some Empirical Evidence”, Journal of the Royal Statistical Society. Series D (The Statistician) 28(2), pp. 101-107.
  • HSİAO, C. (2003). Analysis of Panel Data, Cambridge University Press: Cambridge.
  • İLKKARACAN, I. AND R. SELİM. (2003). “The Role of Unemployment in Wage Determination: Further Evidence on the Wage Curve from Turkey” Applied Economics, 35, pp. 1589-98.
  • JOHNSTON, J. AND J. DİNARDO. (1997). Econometric Methods, McGraw-Hill International Editions, Singapore.
  • KUNCE, M. (2006). “What Factors Effect a State’s Manufacturing Employment? Evidence from 1974-1994 State Panel Data” Review of Urban and Regional Development Studies,18(1).
  • KRİSHNA, P., D. MİTRA AND S. CHİNOY. (2000). “Trade Liberalization and Labor Demand Elasticities: Evidence from Turkey” Journal of International Economics 55:391-409.
  • ONARAN, Ö. (2000). “Türkiye'de Yapısal Uyum Sürecinde Emek Piyasasının Etkinliği”, Toplum ve Bilim, 86 (Güz 2000).
  • REZA, A. M. (1978). “Geographical Differences in Earnings and Unemployment Rates” Review of Economics and Statistics 60:201-208.
  • TELLİ, Ç., E. VOYVODA AND E. YELDAN. (2006). “Turkish Economy Under the post-1998 IMF Program: Modeling General Equilibrium for Socially Responsible Macroeconomics”. Bağımsız Sosyal Bilimciler İktisat Grubu Çalışmaları, Internet Site: http://goo.gl/sPTkF Access Date: 31 July 2011.
  • TOPEL, R. H. (1986). “Local Labor Markets” Journal of Political Economy, Supplement, 94: 111-143.
  • WOOLRİDGE, J. M. (2002). Econometric Analysis of Cross Section and Panel Data, MIT Press: Massachusetts, USA.
  • WOOLRİDGE, J. M. (2003). Introductory Econometrics: A Modern Approach, South-Western: Ohio, USA.
There are 28 citations in total.

Details

Primary Language Turkish
Journal Section Articles
Authors

Çağaçan Değer This is me

Publication Date July 1, 2011
Published in Issue Year 2011 Volume: 2 Issue: 2

Cite

APA Değer, Ç. (2011). Sectoral Employment and Labor Costs: Elasticity Evidence on Turkey. Ege Stratejik Araştırmalar Dergisi, 2(2), 15-26. https://doi.org/10.18354/esam.81742
AMA Değer Ç. Sectoral Employment and Labor Costs: Elasticity Evidence on Turkey. ESAM. July 2011;2(2):15-26. doi:10.18354/esam.81742
Chicago Değer, Çağaçan. “Sectoral Employment and Labor Costs: Elasticity Evidence on Turkey”. Ege Stratejik Araştırmalar Dergisi 2, no. 2 (July 2011): 15-26. https://doi.org/10.18354/esam.81742.
EndNote Değer Ç (July 1, 2011) Sectoral Employment and Labor Costs: Elasticity Evidence on Turkey. Ege Stratejik Araştırmalar Dergisi 2 2 15–26.
IEEE Ç. Değer, “Sectoral Employment and Labor Costs: Elasticity Evidence on Turkey”, ESAM, vol. 2, no. 2, pp. 15–26, 2011, doi: 10.18354/esam.81742.
ISNAD Değer, Çağaçan. “Sectoral Employment and Labor Costs: Elasticity Evidence on Turkey”. Ege Stratejik Araştırmalar Dergisi 2/2 (July 2011), 15-26. https://doi.org/10.18354/esam.81742.
JAMA Değer Ç. Sectoral Employment and Labor Costs: Elasticity Evidence on Turkey. ESAM. 2011;2:15–26.
MLA Değer, Çağaçan. “Sectoral Employment and Labor Costs: Elasticity Evidence on Turkey”. Ege Stratejik Araştırmalar Dergisi, vol. 2, no. 2, 2011, pp. 15-26, doi:10.18354/esam.81742.
Vancouver Değer Ç. Sectoral Employment and Labor Costs: Elasticity Evidence on Turkey. ESAM. 2011;2(2):15-26.