The controversy over employment policy: Low labor costs and openness, or demand policy? A sectoral analysis for Turkey

Ozlem Onaran and Nursel Aydiner-Avsar

Department of Economics Working Papers from Vienna University of Economics and Business, Department of Economics

Abstract: The purpose of this paper is to test the effects of labor cost, openness, and demand side variables on employment for the case of Turkey using the panel data of private manufacturing industry at three digit level for 25 sectors for the period of 1973-2001. We use a seemingly unrelated regression (SUR) model, which allows for cross-sectoral heterogeneity. The estimation results show that higher growth is more effective in stimulating employment compared to lower labor costs. The reliance of Turkey and many developing countries on labor market flexibility and openness as the unique tools of employment policy reflects a pro-capital incomes policy bias rather than a necessity. The results confirm the Keynesian emphasis on demand-side policies to fight against unemployment.

JEL-codes: E24 F16 J23 (search for similar items in EconPapers)
Date: 2006-08
New Economics Papers: this item is included in nep-cwa, nep-lab and nep-mac
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Related works:
Journal Article: THE DETERMINANTS OF EMPLOYMENT: A SECTORAL ANALYSIS FOR TURKEY (2010)
Working Paper: The controversy over employment policy: Low labor costs and openness, or demand policy? A sectoral analysis for Turkey (2006)
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