THE SECTORAL EMPLOYMENT EFFECTS OF INTERNATIONAL TRADE AND PRODUCTIVITY IN THE MANUFACTURING INDUSTRY OF TURKEY

Abstract

Purpose-Turkish international trade mainly consists of the sectors of manufacturing industry and also determines the dynamics in this industry. Therefore, export demand, import competition and technological changes (productivity) are very important topics for the sectors of Turkish manufacturing industry. Besides the direct employment effects of international trade, trade variables influence productivity and therefore indirectly affect employment. This study empirically analyzes the direct and indirect effects of international trade on sectoral employment in the Turkish manufacturing industry. Methodology-The data used in this study includes 22 sectors of the Turkish manufacturing industry for the period of 2009 – 2017. The panel data techniques are employed. Industry classification is NACE Rev. 2 (2-digit). Findings-The estimations show that international trade is effective on sectoral employment in the Turkish manufacturing industry. Both export demand and import penetration have a significant impact on sectoral employment in Turkey. While the increase in export demand leads to an increase in labour demand, the increase in import penetration reduces it. However, the relationship between productivity and international trade makes a negative effect on sectoral employment. The strong negative relationship between import competition and productivity, measured by value added per worker, suggests that firms, when faced with international competition, can not adjust the level of employment to decreased demand. On the other hand, the main determinant of productivity in the Turkish manufacturing industry seems to be investment expenditures. Conclusion- According to our findings, international trade is an important determinant of sectoral employment in the Turkish manufacturing industry. There is a positive relationship between export demand and employment while the relationship is negative for import competition. However, export demand is not a significant factor for productivity while import competition and productivity is negatively related. On the other hand, the main determinant of productivity in the Turkish manufacturing industry is investment expenditures. The productivity equation shows that this variable is positive and statistically significant.

Keywords

• International Trade
• Export Demand
• Import Competition
• Productivity
• Employment

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