THE RESPONSE OF EMPLOYMENT TO GDP GROWTH IN TURKEY: AN ECONOMETRIC ESTIMATION

This paper aims to investigate the mechanism of adjustment in the labor market with respect to changes in GDP. For this purpose, the response of employment, i.e. demand for labor, to the changes in GDP is modeled as an error correction model (ECM). The results indicate that the adjustments in the labor market lagged GDP growth. Confining the analysis to the manufacturing sector provides similar results. Further analyses of variance decomposition also point to the relation between GDP and employment. However, labor market responds to GDP changes with a delay of more than 4 periods.