Hysteresis effect analysis for Turkey labor market : Ratchet model application

After the shocks in the economies of countries, not returning of unemployment level to long term equilibrium level prepared the ground to coming up the hysteresis hypothesis. According to hysteresis hypothesis NAIRU value automatically follows the current unemployment rate. Within the framework of mentioned approach, there are a lot of studies that examine the hysteresis effect on unemployment rates of single country or groups of countries. However, studies dealing the subject in terms of Turkey labour market are limited. With this motivation, the existence of hysteresis effect on Turkey' unemployment rate is examined with the aid of Ratchet model in this study, in which general (15+ age), non-agricultural (15+ age), male (15+ age), female (15+ age), youth (15-24 age), and adult (25+ age), unemployment rates belong to 1988- 2015 used semi-annually. When the obtained data from Ratchet model were analyzed, it was concluded that hysteresis has effect on all unemployment rates except adult unemployment rate. These results show that after a shock on Turkey's economy, all the unemployment rates except adult unemployment rate have not returned to long term equilibrium level. Key Words: Hysteresis Effect, Ratchet Model, Turkey‟s Labour Market, Ratchet Effect