The effect of foreign trade on productivity

In this study, it is aimed to explain the effect of foreign trade on productivity in Turkey. Firstly, historical development of the term "productivity" is analysed. According to the up-to-date definition of productivity, it comes to mind not only with production itself but also with production processes, production techniques, labour, quality and environmental sensibility. Therefore, the managerial basis of this research is formed based on such definition. This research aims to find out long and short term relations between the import, export and labour force productivity in the years between 1980 and 2015. As a result of applied co-integration tests of Engle-Granger and Johanson, it has been revealed that there is a long term co-integration between the variables. However, as a result of short term relation test between the variables using Granger's causality method, any evidence of a meaningful relation between variables could not be found out. Pursuant to the results of our Impulse-Response analysis and Variance Decomposition methods, which aimed to demonstrate the relation between foreign trade and productivity, it has been revealed that foreign trade is insufficient to explain productivity; on the contrary productivity explains substantially the foreign trade. Key words: Foreign Trade, Labor Force Productivity, Co-integration, Causality