Relationship of unemployment and growth: 2000-2012 case of Turkey

In economics literature a linear relationship between employment and growth has been assumed for along time. However, in recent years, the inability of high growth rate in influencing the employment in Turkey has not confirmed this theory. It strengthens the phenomenon that growth has failed to create jobs for young population who are most densely age group and also most intense age group in unemployment in Turkey. It has increased the attractiveness of subject in the academic sense that in spite of high growth rates in Turkey?s economy, unemployment continues to exist as a serious problem. In this study, it is aimed to examine more closely the relationship between unemployment and growth for Turkey?s economy. To that end, the relationship between some demographic unemployment variables with growth were investigated as applied with the data for the period 2000:Q1-2012:Q3. The variables which were used are total unemployment, young unemployment, female-male unemployment and rural-urban unemployment and growth (real GDP). The presence and direction of the relationship between variables were investigated using a VAR model. Also Granger causality analysis, variance decomposition analysis and impulse-response analysis which are got out of VAR model were applied. The results have shown that there aren?t mutual causality between variables, there is one-way causality only from male unemployment rate towards growth; in short-term, growth isn?t adequate to explain unemployment rates, but in the long-term it is; growth variable negatively affects the unemployment rates but this effect is not meaningful. Keywords: Unemployment, Growth, VAR, Causality, Turkey