Intensive Margin and Extensive Margin Adjustments of Labor Market: Turkey versus United States

Intensive Margin and Extensive Margin Adjustments of Labor Market: Turkey versus United States

Title:

Intensive Margin and Extensive Margin Adjustments of Labor Market: Turkey versus United States

Number:

13/39

Author(s):

Temel Taşkın

Language:

English

Date:

October 2013

Abstract:

In this paper, we document the intensive and extensive margin adjustments of labor market in Turkey and US. We find that both margins are important. More interestingly, the weight of intensive margin adjustment is substantially smaller than that of the extensive margin in both countries. This is robust to using various data sets and methods. Common wisdom and some theory would expect these countries to divert from each other significantly, because they represent two extreme points of labor market flexibility with respect to OECD Employment Protection Index. A possible explanation for our empirical result is the sizable informal sector and self employment in Turkey as it might reduce the large hiring and firing costs and encourage firms towards extensive margin adjustment, and high hours per worker which might restrict the intensive margin adjustment, especially during booms.

Keywords:

Intensive Margin, Extensive Margin, Labor Market Flexibility.

JEL Codes:

J20; J60

Intensive Margin and Extensive Margin Adjustments of Labor Market: Turkey versus United States
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