Globalization, Technology and Skills: Evidence from Turkish Longitudinal Microdata

This paper explores the causes of skill-based employment differentials within the Turkish manufacturing sector over the period 1980-2001. Turkey is taken as an example of a developing economy that, in that period, had been technologically advancing and becoming increasingly integrated with the world market. The empirical analysis is performed at firm level within a dynamic framework using a two-equation model that depicts the employment trends for skilled and unskilled workers separately. In particular, the System Generalized Method of Moments (GMM-SYS) procedure is applied to a panel dataset comprised of 17,462 firms. Our results confirm the theoretical expectation that developing countries face the phenomena of skill-biased technological change and skill-enhancing technology import, both leading to increasing the employment gap between skilled and unskilled workers. In particular, strong evidence of an absolute skill bias emerges: both domestic and imported technologies increase the demand for skilled workers only, not significantly affecting the demand for the unskilled labor. Finally, “learning by exporting” also appears to have a (relative) skill biased impact, increasing the demand for skilled workers to a much larger extent than that for the unskilled.