DOES HIGHER SHARE IN TOTAL TRADE STIMULATE REGIONAL LABOR MARKET OUTCOMES? THE CASE OF TURKEY

Standard trade theory relies on the assumption of long-run full-employment, thus implying that although trade can affect wage rates and change the sectoral distribution of employment, it has no effect on the overall level of employment. In the empirical literature, it is a controversial debate that trade openness is good for employment in the long-run. If so, the further question is about the poorer regions in the developing countries which are fully open to trade. Turkey is one of these countries experienced trade liberalization three decades ago. Although its regions ’ connection to markets is effective due to limited lack of access to key inputs and low transport costs, their shares in total trade and labor market outcomes strikingly vary depending on the density of local economic activities. While trade volumes and employment creation capacities of some regions are quite high, relevant indicators for some others are disappointing. The aim of this paper is to explore the relation between regional trade volumes and major labor market indicators. To this end, empirical analyses are designed to test the hypothesis that more regional trade volume leads to more employment opportunities and stimulates the job creation capacities of local labor markets. The data sets used in the analyses are from Turkish Statistical Institute, one being trade statistics by province which consists of export an