Effects of the fundamental macro-economic variables and employment intensive laws on employment in Turkey

The main reason behind the preparation of this thesis is that even though unemployment problem has been come into prominence in Turkey after 2000, there have been no such studies for Turkey in the literature. In addition, the studies that have investigated employment and unemployment, were appeared to be, mostly, used a single variable in order analyze causality with unemployment/employment. The thesis examines macroeconomic variables and policy variables influences on unemployment within the same model and provides information on the magnitude of influences of macroeconomic variables on unemployment. Therefore in the framework of the policies targeting to employment, it presents foreknowledge on what the prior goals of macroeconomic policies are. This aspect separates the study from the studies that have been made on Turkey.The study investigates macroeconomic variables- that are, Real GDP, Real Interest Rate, Real Exchange Rate, Export-Import Ratio- and policy variables- that are, loads on wages and two incentives laws, numbered 5084 and 5763, for investment and employment - influences on employment. In order to analyze dynamic influences mentioned fundamental macroeconomic variables on employment, generalized impulses-responses developed by Pesaran and Shin (1998) is applied by using Vector Error Correction Model (VECM).The results obtained from impulses-responses analysis indicated that the ratio of exports to imports was the strongest dynamic influences on employment among all fundamental macroeconomic variables used in the study. Besides this finding, the study found that increase in real GDP variables increased employment. Further, increase in real interest rate was seen to permanently reduce employment and appreciation of domestic currency extracted negative influence on employment but it was seen that it was not very important in terms of magnitude. According to those findings, the policy to affect exports to imports should be structural measures. This policy, also, should be supported by additional measures that enables economic growth and suppress interest rates so it is thought that efficiency of the policy would increase. In addition, those macro-economic approaches must be complemented with policies to reduce burdens on wages and to create a stable exchange rate. Lastly, employment incentive policies with having nation-wide coverage are expected to lead more effective results.Key Words:1.Employment, 2.Macro Economic Variables, 3.Incentives Laws, 4.Unemployment, 5.Turkish Economy