Impact of Foreign Trade Openness on Regional Unemployment: The Case of Turkey

Regional unemployment rates are the main indicator of regional development related to the labor market. Therefore, policies to combat unemployment should be ensured to spread the investments to the regions. Besides, since foreign trade will enable production for larger markets, the level of employment may be increased by directing enterprises to foreign trade. Consequently, it is important to investigate the relationship between foreign trade openness and unemployment at the regional level. In this study, the relationship between regional foreign trade openness and unemployment in Turkey were investigated using dynamic linear panel data analysis methods for period 2004-2014. Analysis results indicated a negative relationship between the regional foreign trade openness and the unemployment rate. In addition, the results of Dumitrescu-Hurlin panel causality test showed that the relationship between these two variables is bidirectional. According to these results, with the policies to increase regional trade openness, regional unemployment rate could be reduced in Turkey