Influence of Material and Labour on Construction Index Predictability

Abstract

This study examines the long-run relationship between construction materials and labour with the construction cost index. The essence is also to investigate the efficiency of the variables that predict the construction index in Turkey. Monthly data from January 2015 to August 2023 was obtained for four Turkish indexes on construction, building, residential and non-residential as dependent variables. In contrast, the monthly material and labour cost indexes were obtained as explanatory variables. The study employed the fully-modified ordinary least square (FMOLS) technique. The findings revealed that the material cost index determines a substantial part of the construction index, followed by the labour cost index. However, those costs are less efficiently used. Therefore, the suggestion is that the construction industry should shift from the traditional approach and consider a more efficient approach through technological innovation. This finding supports the need for the construction industries to employ appropriate technology to enhance accurate construction index prediction that could prevent waste from labour slack time and procurement of costly materials. However, the limitation of the study is the data constraint in obtaining more variables for the prediction. Still, material and labour cost indexes used for the prediction are sufficient for making the conclusion of the finding valid.