erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

Adjustment, Stabilisation and the Analysis of the Employment Structure in Turkey: An Input-Output Approach

Öner Günçavdı (Istanbul Technical University)
Suat Küçükçiftçi (Istanbul Technical University)
Andrew McKay (University of Nottingham, UK)

Abstract

The aim of the paper is to examine the effects on employment of a large-scale structural adjustment programme undertaken by Turkey. In this respect, we particularly analyse how appropriate the choices of factor intensity after structural adjustment programme have been in the domestic production in comparison with the availability of domestic factor endowment. From the economic point of view, the choice of the production technology of an industry should be appropriate to the factor endowment of a country. Accordingly, with the low proportion of capital to labour, it is more likely to expect that labour intensive production technologies are to be implemented in developing countries. The well-known theoretical back up for this expectation has been provided by the Hechscher-Ohlin theorem of international trade theory. This theory postulates an exchange of relatively labour-intensive exports with capital-intensive imports in foreign trade for countries possessing more labour than capital. Assessing employment generation effects in the Turkish case is particularly important because Turkey has been widely considered as one of the success stories after launching a far-reaching structural adjustment programme in the early 1980s. However, there have been few studies examining whether changes in production technology and the structure of foreign trade after the structural adjustment programme took place in accordance to the general expectation of neoclassical theory of comparative advantage. It is then likely to ask whether adjustment mobilised labour in the line of the priorities of the economic reform. Previous studies on Turkey have showed that despite these expectations, the trade reform stood out as unsuccessful in reallocating domestic resources according to the factor endowment of the country. In particular, they claimed that employment generation effects of new trade policies did not appear as expected as by the neoclassical trade theory, and domestic production eventually became capital. Although some of these studies have employed the Leontief input-output methodology, they have all omitted the presence of imported intermediate inputs in production. Therefore, there is still a considerable interest in measuring factor intensity in domestic production including the use of domestic and imported intermediate goods, and to see whether the choice of factor proportions in the Turkish industries are in accordance with neoclassical expectations.

Economic Research Center
Middle East Technical University
06531 Ankara Turkey
Phone: + 90 312 210 3044, 210 2003
Fax: +90 312 210 1244
e-mail: metuerc@metu.edu.tr