This paper analyses dynamics of Turkish labor market by using a small macroeconomic model and cointegration approach. Findings obtained in this papers show that real wages are positively related to employment and productivity in the long run. This paper also examines adjustment mechanism in the labor market by estimating Error Correction Models (ECMs). The results point out that the labor market slowly responds to changes in macroeconomic conditions through real wages. Furthermore, the results of impulse response and variance decomposition analyses, depending on SVECM, indicate that real wages have a considerable impact on productivity, while the effect of productivity on real wages is small. Consequently, this paper asserts that real wages are key variable in Turkish labor market and there are a weak link between real wages and productivity and the rigidities in employment in the market.
Key words: Labor Market, Cointegration, SVECM. JEL Classification: J01, C50, E24. Article Language: EnglishTurkish
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