Output–employment Relationship Across Sectors: A Long‐ Versus Short‐run Perspective

Abstract

This paper investigates the nature of the output-employment relationship by using the Turkish quarterly data for the period 1988-2008. Even if we fail to find a long-run relationship between aggregate output and total employment, there are long-run relationships for the aggregate output with non-agricultural employment and sectoral employment levels for seven of nine sectors that we consider. However, a further investigation for the output and employment relationship within a shortrun perspective does not reveal statistically significant relationships for either total employment or non-agriculture employment, or eight of the nine sectors that we consider. Although there are various long-run relationships between output and employment, the short-run links between demand and employment are weak. The various implications of this for the economy and the labour market are discussed. As a result, maintaining high levels of output in the long-run creating demand is essential for employment generation.

Modeling Sectoral Employment in Saudi Arabia

“…The cointegration results documented in Table 3 confirm long-run relationships among employment, value-added and wages for each of the 10 sectors considered. This finding aligns with conclusions of previous studies, such as those by Chletsos and Kollias (1997) for Greece, Aydiner-Avsar and Onaran (2010) and Sahin, Tansel, and Berument (2013) for Turkey, and Skare and Caporale (2014) for 119 economies, which also concluded cointegration relationships among employment, output and wages (with other explanatory variables in some cases). Although we found no study investigating both determinants (GDP and wages) of employment for Saudi Arabia, Alkhateeb et al (2017b,c) and Alkhateeb, Sultan, and Mahmood (2017) find long-run relationships between aggregate employment and GDP at the country level.…”

“…During the post-crisis period, sectoral output remains the main driver of employment in all sectors while the other variables are also influential in most sectors. Sahin, Tansel and Berument (2013) analyze the association between output and employment in Turkey using quarterly data from 1988 to 2008 at the aggregate country level and for nine sectors. Their empirical results show the absence of a long-run relationship between economic output and employment.…”

Manufacturing Production and Non-Agricultural Employment rate in South Africa: Time Series Analysis

“…However, opposing conclusions on the relationship between manufacturing output and employment have also been found in other empirical studies (Basu and Foley, 2011;Madden & Tuckewell, 1975;Sahin, Tansel & Berument, 2013,). Madden and Tuckewell (1975) investigated the relationship between output and employment disaggregated by sectors through the consideration of numerous sectors in the Australian economy and concluded that in most of these sectors the short-run fluctuations in output had no relation to aggregate employment.…”

“…Out of this debate came a number of studies that have attempted to investigate whether this relationship does exist or not. Many of these studies (Akçoraoğlu 2010;Landmann 2002;Lewis-Wren, 1986;Pehkonen;2000;Sawtelle, 2007;Smyth, 1986;Wah, 1997) found a link between output and employment while others (Madden & Tuckewell, 1975;Sahin, Tansel & Berument, 2013) found that no such relationship exists between these two variables, especially in the short-run. This means that a short-run shock in overall output is not directly linked to an increase or decrease in total unemployment.…”

“…This means that a short-run shock in overall output is not directly linked to an increase or decrease in total unemployment. Furthermore, some have argued that the rapid growth of productivity, particularly in manufacturing, has hurt workers in those industries by leading producers to shed jobs and switching to capital intensive production (Sahin et al, 2013). Critics of this point of view generally argue that while this might be true for a particular firm or industry, or might hold in the shortrun, in the longer run the level of creation or unemployment will be determined by macroeconomic policies rather than by productivity growth (Sahin et al,2013).…”