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Institutional Rigidities and Their Effects on Labor Demand in Turkey

Year 2013, Volume: 20 Issue: 20, - , 01.09.2013

Abstract

This study analyzes the effects of one of the institutional rigidities in Turkish labour market; job security regulations introduced with new labour code legislated in 2003, on the labour demand. By examining the periods before and after the year 2003 with panel data methods, the changes in the responsiveness of labour demand to the changes in labour costs are investigated. In the study in which TURKSTAT Manufacturing Industry Statistics are used, it is found that the responsiveness of labour demand to the changes in labour costs increased after 2003. It is concluded that the labour costs and job security regulations which influence these costs indirectly are effective on the hiring and firing decisions of employers. When a distinctive analysis based on gender is made, it is found that while the results related demand for male workers are similar with the total demand estimates; the demand for female workers does not have a significant response to the changes in labour costs. Estimates in which the openness variable is included show that openness effects labour demand in negative direction.

References

  • Abraham, K.G. & S.N. Houseman (1993), “Does employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France and Belgium”, Upjohn Institute Working Paper, No. 93-16, <http://research.upjohn.org/up_workingpapers/16/>, 15.10.2010.
  • Baltagi, B.H. (2005), Econometric Analysis of Panel Data, 3ed, West Sussex: John Wiley.
  • Bentolila, S., J.J. Dolado, W. Franz and C. Pissarides (1994), “Labor flexibility and wages: Lessons from Spain”, Economic Policy, 9(18), 53-99.
  • Besley, T. and R. Burgess (2004), “Can Labor Regulation Hinder Economic Performance? Evidence from India”, The Quarterly Journal of Economics, 119(1), 91-134.
  • Burgess, S., M. Knetter and C. Michealacci (2000), “Employment and Output Adjustment in the OECD: A Disaggregate Analysis of the Role of Job Security Provisions”, Economica, New Series, 67(267), 419-435.
  • Daniel, K. and W.S. Siebert (2005), “Does Employment Protection Reduce the Demand for Unskilled Labor?”, International Economic Journal, 19(2), 197-222.
  • Di Tella, R. and R. MacCulloch (2005), “The consequences of labor market flexibility: Panel evidence based on survey data”, European Economic Review, 49, 1225–1259.
  • Downes, A.S., N. Mamingi and R.M.B. Antoine (2000), “Labor Market Regulation and Employment in the Caribbean”, Inter-American Development Bank Working Paper, No 388.
  • Fallon, P.R. and R.E.B. Lucas (1991), “The Impact of Changes in Job Security Regulations in India and Zimbabwe”, The World Bank Economic Review, 5(3), 395-413.
  • Feldmann, H. (2009), “The Unemployment Effects of Labor Regulation around the World”, Journal of Comparative Economics, 37, 76–90.
  • Garibaldi, P., L. Pacelli and A. Borgarello (2003), “Employment Protection Legislation and the Size of Firms”, IZA Discussion Papers, No 787, <ftp://ftp.iza.org/RePEc/Discussionpaper/dp787.pdf>, 16.10.2010.
  • Günçavdı, Ö. and S. Küçükçifçi (2000), “Açık bir ekonomide sektörel emek yoğunluklarının hesaplanması”, ODTÜ Gelişme Dergisi, 27 (1-2), 133-148.
  • Hausman, J.A. (1978), “Specification tests in econometrics”, Econometrica, 46, 1251-1271.
  • Heckman, J.J. and C. Pages (2000). “The cost of job security regulation: Evidence from Latin American Countries”, Inter-American Development Bank Working Paper, No 430.
  • ILO, (2010), Employment protection legislation database – EPLex, <http://www.ilo.org/dyn/terminate/termmain.home?p_lang=en>, 15.12.2012.
  • Lazear, E. (1990), “Job Security Provisions and Employment”, The Quarterly Journal of Economics, 105(3), 699-726.
  • Mondino, G. and S. Montoya (2000), “The Effects of Labor Market Regulations on Employment Decisions by Firms: Empirical Evidence for Argentina”, Inter-American Development Bank Working Paper, No 391.
  • Morgan, J. (2001), “Employment Security and the Demand for Labor in Europe”, Applied Economics, 33(14), 1763-1774.
  • Nickell, S. (1997), “Unemployment and Labor Market Rigidities: Europe versus North America”, The Journal of Economic Perspectives, 11(3), 55-74.
  • Nunziata, L. (2003), “Labor Market Institutions and the Cyclical Dynamics of Employment”, Labour Economics, 10, 31–53.
  • OECD (2008), Detailed description of employment protection OECD and selected non-OECD countries, <http://www.oecd.org/dataoecd/24/39/42740165.pdf>, 19.02.2011.
  • OECD (2010), Indicators of Employment Protection, <www.oecd.org/employment/protection>, 13.02.2011.
  • OECD (2010), Annual Real GDP Growth and Unemployment Rate Data, <http://stats.oecd.org/Index.aspx>, 14.12.2010.
  • Roy, S.D. (2004), “Employment Dynamics in Indian Industry: Adjustment Lags and the Impact of Job Security Regulations”, Journal of Development Economics, 73, 233–256.
  • Saavedra, J., and M. Torero (2000), “Labor Market Reforms and Their Impact on Formal Labor Demand and Job Market Turnover: the case of Peru”, Inter-American Development Bank Working Paper, No 394.
  • TURKSTAT (2010), Annual Manufacturing Sector and Foreign Trade Statistics, <http://www.turkstat.gov.tr/Start.do>, 14.12.2010.
  • Vandenberg, P. (2010), “Impact of Labor Market Institutions on Unemployment: Results from a Global Panel”, Asian Development Bank Working Paper, No 219, <http://www.adb.org/documents/working-papers/2010/economics-wp219.pdf>, 10.11.2010.

Institutional Rigidities and Their Effects on Labor Demand in Turkey

Year 2013, Volume: 20 Issue: 20, - , 01.09.2013

Abstract

This study analyzes the effects of one of the institutional rigidities in Turkish labour market; job security regulations introduced with new labour code legislated in 2003, on the labour demand. By examining the periods before and after the year 2003 with panel data methods, the changes in the responsiveness of labour demand to the changes in labour costs are investigated. In the study in which TURKSTAT Manufacturing Industry Statistics are used, it is found that the responsiveness of labour demand to the changes in labour costs increased after 2003. It is concluded that the labour costs and job security regulations which influence these costs indirectly are effective on the hiring and firing decisions of employers. When a distinctive analysis based on gender is made, it is found that while the results related demand for male workers are similar with the total demand estimates; the demand for female workers does not have a significant response to the changes in labour costs. Estimates in which the openness variable is included show that openness effects labour demand in negative direction.

References

  • Abraham, K.G. & S.N. Houseman (1993), “Does employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France and Belgium”, Upjohn Institute Working Paper, No. 93-16, <http://research.upjohn.org/up_workingpapers/16/>, 15.10.2010.
  • Baltagi, B.H. (2005), Econometric Analysis of Panel Data, 3ed, West Sussex: John Wiley.
  • Bentolila, S., J.J. Dolado, W. Franz and C. Pissarides (1994), “Labor flexibility and wages: Lessons from Spain”, Economic Policy, 9(18), 53-99.
  • Besley, T. and R. Burgess (2004), “Can Labor Regulation Hinder Economic Performance? Evidence from India”, The Quarterly Journal of Economics, 119(1), 91-134.
  • Burgess, S., M. Knetter and C. Michealacci (2000), “Employment and Output Adjustment in the OECD: A Disaggregate Analysis of the Role of Job Security Provisions”, Economica, New Series, 67(267), 419-435.
  • Daniel, K. and W.S. Siebert (2005), “Does Employment Protection Reduce the Demand for Unskilled Labor?”, International Economic Journal, 19(2), 197-222.
  • Di Tella, R. and R. MacCulloch (2005), “The consequences of labor market flexibility: Panel evidence based on survey data”, European Economic Review, 49, 1225–1259.
  • Downes, A.S., N. Mamingi and R.M.B. Antoine (2000), “Labor Market Regulation and Employment in the Caribbean”, Inter-American Development Bank Working Paper, No 388.
  • Fallon, P.R. and R.E.B. Lucas (1991), “The Impact of Changes in Job Security Regulations in India and Zimbabwe”, The World Bank Economic Review, 5(3), 395-413.
  • Feldmann, H. (2009), “The Unemployment Effects of Labor Regulation around the World”, Journal of Comparative Economics, 37, 76–90.
  • Garibaldi, P., L. Pacelli and A. Borgarello (2003), “Employment Protection Legislation and the Size of Firms”, IZA Discussion Papers, No 787, <ftp://ftp.iza.org/RePEc/Discussionpaper/dp787.pdf>, 16.10.2010.
  • Günçavdı, Ö. and S. Küçükçifçi (2000), “Açık bir ekonomide sektörel emek yoğunluklarının hesaplanması”, ODTÜ Gelişme Dergisi, 27 (1-2), 133-148.
  • Hausman, J.A. (1978), “Specification tests in econometrics”, Econometrica, 46, 1251-1271.
  • Heckman, J.J. and C. Pages (2000). “The cost of job security regulation: Evidence from Latin American Countries”, Inter-American Development Bank Working Paper, No 430.
  • ILO, (2010), Employment protection legislation database – EPLex, <http://www.ilo.org/dyn/terminate/termmain.home?p_lang=en>, 15.12.2012.
  • Lazear, E. (1990), “Job Security Provisions and Employment”, The Quarterly Journal of Economics, 105(3), 699-726.
  • Mondino, G. and S. Montoya (2000), “The Effects of Labor Market Regulations on Employment Decisions by Firms: Empirical Evidence for Argentina”, Inter-American Development Bank Working Paper, No 391.
  • Morgan, J. (2001), “Employment Security and the Demand for Labor in Europe”, Applied Economics, 33(14), 1763-1774.
  • Nickell, S. (1997), “Unemployment and Labor Market Rigidities: Europe versus North America”, The Journal of Economic Perspectives, 11(3), 55-74.
  • Nunziata, L. (2003), “Labor Market Institutions and the Cyclical Dynamics of Employment”, Labour Economics, 10, 31–53.
  • OECD (2008), Detailed description of employment protection OECD and selected non-OECD countries, <http://www.oecd.org/dataoecd/24/39/42740165.pdf>, 19.02.2011.
  • OECD (2010), Indicators of Employment Protection, <www.oecd.org/employment/protection>, 13.02.2011.
  • OECD (2010), Annual Real GDP Growth and Unemployment Rate Data, <http://stats.oecd.org/Index.aspx>, 14.12.2010.
  • Roy, S.D. (2004), “Employment Dynamics in Indian Industry: Adjustment Lags and the Impact of Job Security Regulations”, Journal of Development Economics, 73, 233–256.
  • Saavedra, J., and M. Torero (2000), “Labor Market Reforms and Their Impact on Formal Labor Demand and Job Market Turnover: the case of Peru”, Inter-American Development Bank Working Paper, No 394.
  • TURKSTAT (2010), Annual Manufacturing Sector and Foreign Trade Statistics, <http://www.turkstat.gov.tr/Start.do>, 14.12.2010.
  • Vandenberg, P. (2010), “Impact of Labor Market Institutions on Unemployment: Results from a Global Panel”, Asian Development Bank Working Paper, No 219, <http://www.adb.org/documents/working-papers/2010/economics-wp219.pdf>, 10.11.2010.
There are 27 citations in total.

Details

Primary Language English
Journal Section Articles
Authors

Selçuk Gül This is me

Publication Date September 1, 2013
Submission Date December 12, 2014
Published in Issue Year 2013 Volume: 20 Issue: 20

Cite

APA Gül, S. (2013). Institutional Rigidities and Their Effects on Labor Demand in Turkey. Sosyoekonomi, 20(20). https://doi.org/10.17233/se.72445
AMA Gül S. Institutional Rigidities and Their Effects on Labor Demand in Turkey. Sosyoekonomi. October 2013;20(20). doi:10.17233/se.72445
Chicago Gül, Selçuk. “Institutional Rigidities and Their Effects on Labor Demand in Turkey”. Sosyoekonomi 20, no. 20 (October 2013). https://doi.org/10.17233/se.72445.
EndNote Gül S (October 1, 2013) Institutional Rigidities and Their Effects on Labor Demand in Turkey. Sosyoekonomi 20 20
IEEE S. Gül, “Institutional Rigidities and Their Effects on Labor Demand in Turkey”, Sosyoekonomi, vol. 20, no. 20, 2013, doi: 10.17233/se.72445.
ISNAD Gül, Selçuk. “Institutional Rigidities and Their Effects on Labor Demand in Turkey”. Sosyoekonomi 20/20 (October 2013). https://doi.org/10.17233/se.72445.
JAMA Gül S. Institutional Rigidities and Their Effects on Labor Demand in Turkey. Sosyoekonomi. 2013;20. doi:10.17233/se.72445.
MLA Gül, Selçuk. “Institutional Rigidities and Their Effects on Labor Demand in Turkey”. Sosyoekonomi, vol. 20, no. 20, 2013, doi:10.17233/se.72445.
Vancouver Gül S. Institutional Rigidities and Their Effects on Labor Demand in Turkey. Sosyoekonomi. 2013;20(20).