The Sectoral Employment Effects Of International Trade And Productivity In The Manufacturing Industry of Turkey


Akkuş G. E.

European Trade Study Group (ETSG) Conference, Bern, Switzerland, 12 - 14 September 2019, pp.1-20

  • Publication Type: Conference Paper / Summary Text
  • City: Bern
  • Country: Switzerland
  • Page Numbers: pp.1-20
  • Istanbul University Affiliated: Yes

Abstract

            ABSTRACT     

Turkey experienced a major structural change in the 1980s by shifting from an import substituting industrialization strategy to an export-oriented growth model via implementing an orthodox structural adjustment program. Turkey has also gone through a substantial process of liberalization at the national as well as international level in the 2000s and it is seen as a successful example of integration to the world economy.                

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.

According to the figures of Turkish Statistical Institute, the share of Turkish manufacturing industry in total exports and imports was 94% and 82%, respectively in 2017 while its share in total production and employment became 18% and 25%, respectively for the same year.

The current study analyzes the direct and indirect effects of international trade on sectoral employment using data including 22 sectors of the Turkish manufacturing industry for the period 2009 - 2017 and employing panel data techniques, Industry classification is NACE Rev. 2 (2-digit).

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. Our findings suggest that export demand is not a determinant of productivity while import competition and productivity is negatively related.

The strong negative relationship between import competition and productivity, measured by value added per worker, suggests that firms, when faced with international competition, cannot 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. The productivity equation shows that this variable is positive and statistically significant.

The first section of the study is a survey of the literature on the relationship between trade, productivity and employment. The second section empirically investigates the relationship between trade and sectoral employment, trade and productivity and finally productivity and sectoral employment in the manufacturing industry of Turkey. The last section gives a summary of the empirical results and concluding remarks.

Keywords: International Trade, Export Demand, Import Competition, Productivity, Employment, Labour Market, Panel Data Techniques.  

JEL Codes:  F14, F16.