Employment and income in Turkey: A sectoral analysis

In the study, the relations between employment rate and sectoral product in Turkey are examined between 2002-2019. Due to the economic crises experienced in 2001 and 2002, the study was planned for the period after 2002. In the implementation part of the study, Autoregressive Distributed Lag Bound Test (ARDL), Johansen Cointegration Analysis and Error Correction Model methods were used. In the study, the dependent variable is employment rate, independent variables are gross domestic product, agricultural sector product, industry sector product, labor sector product, total tax revenues from enterprises, fixed capital investment expenditures and the ratio of exports to imports. For Model 1, dependent variable is employment rate, independent variables are agricultural sector product, industry sector product, labor sector product, total tax revenues from enterprises, fixed capital investment expenditures and export import coverage ratio. For Model 2, the dependent variable is the employment rate, the independent variables are the gross domestic product, the sum of tax revenues from businesses, fixed capital investment expenditures, the export-import coverage ratio. Since the stationarities of the variables in Model 1 are at different levels, the ARDL method was used. According to the long-term ARDL results of Model 1, there is a statistically significant and positive relationship between fixed capital investment expenditures and employment rate. No statistically significant relationship was found between other variables and the employment rate. According to the short-term ECM results, it has been determined that the short-term error in Model 1 will decrease by 0.97 in each quarter and Model 1 will stabilize in the long-term. In addition, there is a statistically significant and negative relationship between the employment rate in the short term and four-period lagged real agricultural product. There is a significant and negative relationship between the two-period lagged real industrial sector output and the employment rate. There is a statistically significant and negative relationship between the current real labor sector output and the employment rate. Statistically, between current and one-period lagged real fixed capital investment expenditures and employment rate, there is significant and positive real fixed capital investment expenditures with a four-period lag and employment rate. Statistically, there is a statistically significant and positive relationship between the current imports' export coverage ratio and the employment rate, and between the first, second and third period lagged values and the employment rate. In Model 2, Johansen cointegration analysis was applied for all the variables were stationary in the first difference. According to the results of Johansen analysis of Model 2, a 1% unit increase in real GDP in the long run increases the employment rate by 0.35%. A 1% increase in real fixed capital investment expenditures increases the employment rate by 0.22%. A one-unit increase in tax revenues reduces the employment rate by 4.5%. According to the ECM result of Model 2, there is a short-term relationship between fixed capital investment expenditures and employment. In Model 2, the short-term error decreases by about 0.018 in each quarter, and the model comes to equilibrium in the long-term. As policy recommendations, the fact that there is no long-term relationship between sectoral output and employment rate in Model 1 reveals that the relationship between output and employment in Turkey should be strengthened. Unemployment will decrease as a result of supporting sectoral investments that will increase employment in Turkey. In addition, the increase in fixed capital investments has been determined as another finding that will increase the employment rate.