Output-Employment Relationship across Sectors: A Long- versus Short-Run Perspective

This paper investigates the nature of the output-employment relationship by using the Turkish quarterly data for the period 1988-2008. Even if we fail to find a long-run relationship between aggregate output and total employment, there are long-run relationships for the aggregate output with non-agricultural employment and sectoral employment levels for seven of nine sectors that we consider. However, a further investigation for the output and employment relationship within a short-run perspective do not reveal statistically significant relationships for either total employment, or non-agriculture employment or the eight out of the nine sectors that we consider. Although there are various long-run relationships between output and employment, the short-run links between demand and employment are weak. The various implications of this for the economy and the labor market are discussed. As a result, maintaining high levels of output in the long-run creating the demand is essential for employment generation.