Time Series Analysis of Causal Relationship among Sectoral Labor Productivity in Turkey

Abstract

In this paper, we investigate the causal relationship in terms of labor productivity among GDP and its constituent three main sectors, e.g. agricultural, industrial and services sectors, in Turkey for the period of 1988-2015. In the study we employed Granger causality/block exogeneity Wald test, Impulse Response and Variance Decomposition analysis. The results showed that both agriculture and industry have positive effects on the labor productivity in services sector, and industry has a positive effect on the labor productivity in agriculture sector, while industrial labor productivity is not affected by the others. The main aim of the paper is examine the question of whether agriculture could serve as an engine of growth. Accordingly, the results indicated that labor productivity in agriculture sector increased during the course of study, and contributed to the labor productivity in services sector, as well. To our knowledge, although this method has been applied in various areas, sectoral causality has not been studied for Turkey before.