The effect of unemployment on economic growth: Empirical analysis on Türki̇ye

The main macroeconomic objectives of countries include price stability, full employment and maximising economic growth. Various policies are implemented to achieve these objectives. Economic growth can reduce unemployment rates while increasing welfare levels. However, in the short run, the relationship between economic growth and unemployment rate is generally loose. This study aims to investigate the long-term relationship between economic growth and unemployment and the direction of causality between the variables. This relationship is expected to vary across countries. Unemployment between developing and developed countries is based on many factors such as culture, geography, quality of education, understanding of democracy, moral rules, religious beliefs, individual perception and preferred economic growth model. Therefore, complex factors play a role in determining unemployment rates and they vary across countries. Technological developments across countries and differences in productivity, institutional structures and preferences of economic agents may lead to changes in the relationship between unemployment and economic growth. The data source of the study is Turkey's economic growth rates and unemployment rates. Quarterly data for the period between 2001 and 2021 are used in the analyses. The positive relationship between the variables indicates that Turkey has realised a growth that fails to create employment. The findings of the study show that there is a positive long-run relationship between the variables. This indicates that Turkey has realised a growth that fails to create employment.