|Department of Economics|
Labor Demand in the Turkish Manufacturing Sector
(Supervisor:Fatma Doğruel )
ABSTRACTFirms’ reactions regarding employment is one of the most interested topics in labor economics. According to Rodrik’s (1997) conjecture, labor demand elasticity should increase with globalization. Increase in this elasticity implies higher worker vulnerability in terms of higher employment volatility and lower bargaining power for workers. International trade might lead to an increase in labor demand elasticity with increased competition on the output markets and/or by providing additional substitution possibilities in terms of inputs. Focusing on the latter channel of transmission, this study estimates labor demand functions of the establishments in the Turkish manufacturing sector for the period 2005-2011 and investigates whether the labor demand elasticity altered as a result of increased integration with the world economy. In this context, the relationships of labor demand elasticity with three subtopics of globalization are explored, namely international trade, international outsourcing and nationality of ownership. Two micro data sets of Turkish Statistical Institute (TurkStat), namely Annual Industry and Service Statistics and Foreign Trade Statistics are merged to construct a balanced panel data. This panel data includes 9342 establishments which are employing 20 and more workers and continually operating through the analysis period. Static and dynamic labor demand models are specified to test whether the labor demand elasticity has altered significantly in the Turkish manufacturing sector. The econometric findings obtained from two-way static fixed effects and Arellano-Bond linear dynamic panel-data estimations show that internationalization of the Turkish economy significantly increases the labor demand elasticity in the Turkish manufacturing sector between 2005 and 2011.