IS LABOR PRODUCTIVITY LINKED to REAL WAGES? AN EMPIRICAL STUDY of the TURKISH MANUFACTURING SECTOR

Abstract

Effective employment policies play a crucial role in national economic strategies. Therefore, exploring the relationship between labor force productivity and real wages is of particular importance for policymakers. Amid the lively debate on the relationship and causal factors related to labor productivity and real wages, this study carefully examines the data related to these factors between 1988:Q1 to 2006:Q4 and 2007:Q1 to 2017:Q4. Methodology: In this study, the ARDL Bounds and Toda-Yamamoto causality tests are utilized to analyze the data from both periods. Findings: Different results were found for each period. Although the results varied in the long-term and the short-term, this study's key results suggest there is significant evidence of a long-term relationship among the variables for the first period. There is no evidence of a long-term relationship between the unemployment rate, labor productivity per hour and real wages in the second period. Originality: Unlike other studies in the literature, it was examined the relationship between labor productivity and real wages in the Turkish manufacturing industry separately before and after the 2008 financial crisis and also, two different variables were considered for productivity. Partial (labor) productivity was analyzed for the first period and labor productivity per hour for the second period.