Abstract:

Even though the debate on how and in what direction foreign trade affects unemployment dates back to old times, it is much more intensified by the Heckscher-Ohlin theorem. The impacts of trade liberalization episodes on labor markets are either positive or negative. Therefore, the relationship between trade openness and unemployment in Turkey is investigated in this study by Kapetanios-Shin-Snell (KSS) cointegration test using annual data for the period between the years 1987-2016. The results of the analysis confirm that a long-term relationship exists between trade openness and unemployment. By the results of Fully Modified OLS (FMOLS) and Dynamic OLS (DOLS) test, a 1% increase in trade openness reduces unemployment by 0.78%.

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