Regional Unemployment Disparities in Turkey Abstract
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Finans Politik & Ekonomik Yorumlar 2017 Cilt: 54 Sayı: 634 E. KIRAL - C. MAVRUK 107 Regional Unemployment Disparities in Turkey Abstract This article investigates the disparities in regional unemployment rates and its relationship with labor market variables in Turkey. We first investigate the relati- onship between regional unemployment and national unemployment and second how regional labor market variables affect regional unemployment. The results demonstrate that: (1) there is a long run causality from the national unemploy- ment rate to regional unemployment rates; (2) the response of the market vari- Ersin KIRAL1 ables to the regional unemployment is not significant; (3) the 2009 shock has Can MAVRUK2 transitory effects and regional unemployment rates get back to equilibrium in about seven years; and (4) regional unemployment rates are persistent. Keywords: Unemployment, Regional disparities, Persistence, Panel cointegra- tion, Equilibrium Türkiye’de Bölgesel İşsizlik Farklılıkları Öz Bu makale Türkiye’de bölgesel işsizlik oranlarındaki farklılıkları ve bu farklılıkla- rın işgücü piyasasındaki değişkenler arasındaki ilişkisini araştırmaktadır. İlk ola- rak ortalama işsizlik ile bölgesel işsizlik arasındaki ilişki ve ikinci olarak bölgesel işgücü piyasası değişkenlerin bölgesel işsizliği nasıl etkilediği araştırılmaktadır. Sonuçlar (1) ortalama işsizlik oranı ile bölgesel işsizlik oranları arasında uzun vadeli bir ilişki olduğunu; (2) piyasa değişkenlerinin bölgesel işsizliğe anlamlı bir tepkisi olmadığını; (3) 2009 şokunun geçici etkilere sahip olduğunu ve bölgesel işsizlik oranlarının yaklaşık yedi yılda dengelendiğini ve (4) bölgesel işsizlik oran- larının kalıcı olduğunu göstermektedir. 1 Assistant Prof., Cukurova Anahtar Kelimeler: İşsizlik, Bölgesel farklılıklar, Kalıcılık, Panel eşbütünleşme, University Department of Denge Econometrics, [email protected] ORCID ID: 0000-0001-6040-1795 2 Lecturer Omer Halisdemir University Marketing Department, [email protected] ORCID ID: 0000-0002-4084-7447 Regional Unemployment Disparities in Turkey 108 1. Introduction on and net migration rates over the 2009-2015 pe- riod to analyze the variables after the 2009 shock. Suspension of membership talks between the EU How regional labor market variables affect regi- and Turkey by the European Parliament and in res- onal unemployment is investigated. Methodology ponse a threat to open the gate to Europe for about of this study is as follows: (1) Simple regression three million refugees sparked a hot debate in the models are estimated to explain the proportion of region. The threat includes influx of millions of variations in the mean unemployment rates; (2) Syrian refugees and Turkish unemployed into Eu- Autoregressive Distributed Lag (ARDL) model is rope. In addition, about 20% increase in the TL/ used to estimate the long run equation and adjust- dollar exchange rate reflect an increase in inflation ment coefficients; (3) Unrestricted VAR method is rates, therefore an increase in unemployment rate used to find the response of labor market variables is expected. In order to prevent this increase, short to regional unemployment deviations; (4) Markov term economic policies are implemented. The model is used to analyze the change in regional government is planning to lower unemployment unemployment and in persistence of unemploy- rates by putting pressure on the private sector to ment states. over-hire workers which in turn can lower the wa- ges and the productivity. The main objective of this article is to investigate (1) the disparities in regional unemployment; (2) Employment of the unemployed has been on the the relationship between regional unemployment agenda in Turkey since the 1950s, more explicitly deviations and national unemployment rate; (3) with the 1961 constitution (Yılmaz, 2005). The how regional unemployment rates are affected by global crisis, which had erupted in the summer labor participation and net migration; and (4) the months of 2007, had started to take its toll on the persistence and expectations of regional unemp- Turkish economy beginning in the third quarter of loyment rates using a Markov chain model. 2008. After contracting by 6,8% in the fourth qu- arter of that year, Turkey entered 2009 with a new The remainder of the article is organized as fol- record of contraction of 13,8% in its gross domes- lows. Literature review is given in the next sec- tic product. As export markets contracted and both tion, the analysis on the regional unemployment consumption and investment expenditures dwind- rates are given in section three, model estimations led, aggregate expenditures fell sharply (Yeldan are provided in section four, persistence analysis and Ercan, 2011). This brought a high 14% natio- is given in section five and the paper is concluded nal unemployment rate in 2009. in section six. Disparities in regional unemployment rate or in a 2. Literature Review labor market variable measured by absolute dis- persion, relative dispersion, standard deviation or There are a considerable number of studies in the coefficient of variation show similar behavior. The literature analyzing the relationships among labor response of regional labor market variables to exo- market variables. We provide some studies related genous unemployment or employment shocks is to our study as follows. expected to be slow to adjust back to equilibrium, which can be measured by the impulse response Acar, Günalp and Cilasun (2016) compute the function or by the error correction mechanism. transition probabilities of individuals moving ac- Persistence can be determined from cointegration ross three different labor market states which are tests or using transitions between the states of a employment, unemployment and inactivity. Using regional labor market variable. a Markov chain model they calculate short run transition probabilities for the 2006-2010 period The analysis in this study is mainly based on two by gender, age and education groups. They find panel data of 12 regions in Turkey. The first panel that the persistence of employment has decrea- includes the regional unemployment deviations sed and moving from employment to unemploy- and national unemployment rate over the 2004- ment has increased in the Turkish Labor Market 2015 period and the second panel includes the re- following the 2008 global economic crisis. Even gional unemployment deviation, labor participati- Finans Politik & Ekonomik Yorumlar 2017 Cilt: 54 Sayı: 634 E. KIRAL - C. MAVRUK 109 though a 2008 reform package intended for young nal unemployment difference by ur – uUK, where and female workers was extended to include skil- ur is the unemployment rate in region r and uUK led males over 29 years of age, their results show is the average unemployment rate of the Uni- that the transition from unemployment to employ- ted Kingdom. He constructs time series model ment has decreased significantly for males com- where urr is the unemployment pared to the precrisis period. The authors suggest rate in region r at time t, uUKt is the average unemp- that the reform package should be launched before loyment rate of the United Kingdom at time t, αr= a crisis is more effective. ur–uUK and βr=ur/uUK. In case of cointegration of variables, error correction mechanismis defined by Pehkonen and Tervo (1998) investigate the persis- tence and turnover in unemployment disparities where ∆urr=urr – urt-1 is the first difference, νrt is a in Finland by examining time series data on 10 random residual series, λr is corrected proportion labor districts and 423 municipalities. They use of the disequilibrium and urt-1-(ar+bruUK-1)=ert-1 is two mean shifts in labor district data to calcula- the error correction term. The author estimates cor- te steady-state unemployment rates and show that relations to show that the regional unemployment the steady state unemployment rates differ across structure does not change dramatically from one the labor districts so that the relative position of a period to the next, but instead has been characteri- district tends to be rather stable. The authors consi- zed by long periods of relative stability. The author der autoregressive AR(1) model estimates cointegrating regressions and error cor- to examine persistence and stationarity where rection parameters for all regions and finds that all coefficients are significant at 1% and that the pa- ηt=NID(0,ση) normally identically distributed with rameters are negative, which means a percentage 0 mean and ση standard deviation, μ0 is the mean unemployment rate and β is persistence of unemp- of any divergence between regional and national loyment. Based on the hypothesis that steady sta- unemployment is eliminated in the following year. te unemployment rate of a region depends on the The author estimates the regional unemployment degree of persistence in that region and that the change for two recessions 1980-1983 and 1990- higher the persistence in unemployment to exoge- 1993, and also for 1993-1995, and finds that after nous shocks, the higher the steady-state unemp- the first recession employment expanded rapidly loyment rate, the authors run an AR(1) model for and that although national unemployment conti- municipalitiy data using a dummy and an AR(2) nued to increase, this reflected to structural shock model for labor district data with two mean shift wave of the recession rather than the continuation dummy variables both in logarithm to estimate the of the recession. As for the second recession,