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Okun’s Law under the Demographic Dynamics of the Turkish Labor Market

Author

Listed:
  • Evren Erdogan Cosar
  • Ayse Arzu Yavuz

Abstract

This study examines the asymmetric relationships between demographic characteristics of labor market variables and Gross Domestic Product (GDP) in the Turkish economy. Both expansions and recessions are considered in a Markov Switching (MS) model, using quarterly data between 1989 and 2019. Okun’s coefficients are estimated for the different age groups, genders and education levels. The results reveal that men are more likely to lose their jobs during recessions in Turkey whereas unemployment rates for 25-39 year-olds and those with at least university degrees are the least affected groups. There is also asymmetry within and between states across the demographic groups due to GDP phases. The study also investigates the gender dynamics of labor force participation rates (LFPR) as a fundamental determinant of unemployment rate. According to the MS models, LFPR responds significantly and positively to GDP expansions for men whereas it is significant and negative for women. That is, as economic activity begins to recover after a recession, women leave the labor force as secondary income earners.

Suggested Citation

  • Evren Erdogan Cosar & Ayse Arzu Yavuz, 2021. "Okun’s Law under the Demographic Dynamics of the Turkish Labor Market," Working Papers 2108, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:2108
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2021/21-08
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    More about this item

    Keywords

    Okun’s law; Demographic composition; Turkey;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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