Essays on determinants of export, competitiveness and unit labor cost

Abstract

This thesis consists of three papers. In the first paper, we investigate the causes of the Turkish export-boom after 2000 in the manufacturing sector. We mainly concentrate on the cost and productivity aspects of the production in the manufacturing sector. The effects of productivity, wage and exchange rate are analyzed within the framework of the augmented unit labor cost model. Following the Edwards and Golub (2004) paper we use the dynamic panel data techniques for the analysis. In addition, the importance of the above mentioned factors is examined for the rising and declining sectors. We find that manufacturing export is negatively related to the unit labor cost (ULC). The Decomposition of ULC into its two components also shows that an improvement in productivity increases export while an increase in nominal wages decreases it. We also find that nominal wage is an important factor in the declining sectors while productivity is the stimulus in the rising sectors. In the second paper, we examine Turkey’s international cost competitiveness in manufacturing with respect to the Slovak Republic, and quantitatively investigate the relationship between Turkish cost competitiveness and the exports of manufactured goods at an industry level. The Relative Unit Labor Cost (RULC) measure and dynamic panel data techniques are employed for this analysis. We find that Turkey is not competitive with respect to Slovakia for the 1995-1999 period. The Competitiveness of Slovakia mainly depends on its relatively higher level of labor productivity..