This document summarizes a presentation given at the 16th International Input-Output Conference in Istanbul, Turkey from July 2-6, 2007 titled "Generation & Benefit Spillover of Labor Productivity in Turkey". The presentation analyzes trends in output, employment, and productivity across various economic sectors in Turkey from 1973 to 1990 and decomposes productivity into direct, indirect, and induced effects. Key sectors are identified where output has exceeded or fallen below employment over this period.

1. 16th International Input-Output Conference
Istanbul, Turkey, 2-6 July 2007
GENERATION
& BENEFIT SPILLOVER
OF
LABOR PRODUCTIVITY
IN TURKEY
by
NIKOLAOS ADAMOU & SOTIRIOS THEODOROPOULOS

2. Productivity:
relationship between output & labor
x jt For the entire economy
π jt = as well as for each sector
Ljt at any given point in time

3. Employment in Thousands Gross Output in Million TL in 1973 values
1,600,000
25,000
1,400,000
20,000
1,200,000
1,000,000
15,000
800,000
10,000 600,000
400,000
5,000
200,000
0 0
1973 1979 1985 1990

4. 100 Gross Output in Millions per Empolyment in Thousands
77.9
75
56.4
47.1
50
33.0
25
0
1973 1979 1985 1990

5. 0.0
0.3
0.5
0.8
1.0
1
Agriculture
2
Mining
3
Food-Bever.
4
Textiles
5
Wood-Furn.
6
Paper-Print.
7
Chemicals
8
Oil_Refining
Rubber-Plast.
Glass-Cement
Iron-Steel
Metal_Prdcts
Machinery
Electrical_M.
Transport_V.
Sectoral output per unit of labor
Other_Manfc.
Utilities
Construction
Trade
Transport_S.
Banking
Pers_Serv&H.
1990
1985
1979
1973
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Public_Serv.

6. Relations
Output (x) is produced because:
([ ])
x = [I − A ]
~
−1
y = h I−A
T T
~
• There is final demand y & industrial demand A
T
• Payments & purchases A are made
h

7. Important issues
Output production & allocation
Employment generation
Productivity (produce more with less)
Payments to factors of production
Wages & Salaries
Profits
Rent & other

8. Underlined principles
Whenever there is a market to sell
PRODUCTION increases
Whenever productivity increases
there is not necessarily
increase in employment

9. Net result
Is there any growth?
Do people have work?
Do they get ‘sufficient’ income

10. General Sectoral Outlook
of the Turkish Economy
Output & Employment relations
Sales
of final products & industrial sales
Payments
for value added & industrial purchases

11. Mahalanobis Dist. of Gross Output & Employment
Output & Employment
5.00
4.00
3.00
2.00
1.00
0.00
12 34 5 67 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
QE

12. Sectors with significant
Employment & Output
Agriculture (1)
Iron & Steel (11)
Construction (18)
Public Service (23)

13. Sectors where output
exceeds employment
Food & Beverages (3)
Oil Refining (8)
Transportation Services (20)

14. Sectors where employment
exceeds output
Personnel Services (22)
Trade (19)

15. Value of Final Products & - Sales
Mahalanobis Dist. of Transaction Rows
5.00
Industrial Sales
4.00
3.00
2.00
1.00
0.00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Final Use Interindustry Trans.

16. dominant sales
to industrial sectors
Iron & Steel (11)
Services (22)
Transportation (20)
Banking (21)
Chemicals (7)
Oil Refining (8)

17. dominant sales
for a final use
Construction (18)
Food & Beverages (3)
Trade (19)
Public Services (23)

18. Value addedof Transaction Columns - Purchases
Mahalanobis Dist. payments &
5.00
interindustry purchases
4.00
3.00
2.00
1.00
0.00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Value Added Interindustry Trans.

19. dominant payments
to industrial sectors
Food & Beverages (3)
Construction (18)
Textiles (4)
Electrical Machinery (14)
Iron & Steel (11)

20. dominant payments
to primary inputs
Public Services (23)
Services (22)
Agriculture (1)
Oil Refining (8)

21. Analytical Mechanism
Sales of final products
Sales to industrial sectors
Payments due to purchases
from industrial sectors
Wages
&
Payments for value added
Salaries
Profits
Wages & Salaries
Employment

22. Analytical Mechanism (cont)
x = [I − A ] y = Iy + Ay + A 2 y + A 3 y + L + A n y
−1
[ ]
~ ~ T~2 T ~3 T~n
−1
x =h I − A =h I + h A + h A + h A +L+ h A
T T T T
Utilize the known decomposition of
output generation of similar matrices

23. ( )( )( )
−1 −1 −1 −1
π= L A 2 y+L L An y
Iy + L Ay + L
Analytical Mechanism (cont)
( Iy)+ ( L Ay)+ ( L )
−1 −1 −1 −1
π= L 2 n
A y+L L Ay
π = (h I L )+ (h A L )+ (h A )
~ ~ ~n
−1 −1 −1 −1
+ Lh A L
T T T 2 T
L
Apply the decomposition to the
relationship of output to employment

24. Observation based on the
Productivity Decomposit
Productivity Decomposition
0.10
As productivity
0.08
increases,
0.06
0.04
its direct & indirect
0.02
components
0.00
1973 1979 1985 1990
become more significant
InducedDirect Indirec

25. Most sales
Oil Refining
Allocation Production
are direct
'90
'85
& indirect
'79
to
'73
industrial
1.5 0.5 0.5 1.5
Final Use Direct Req. Indirect Req.
sectors
Value Added Direct All. Indirect All.
Most of the payments are to primary inputs

26. Mahalanobis between
Relationship Distance
productivity & productivity change
5
⎛
⎜ xt +T Lt+ T ⎞
⎟
ln
Oil Refining ⎝ xt Lt ⎠
Λ t,t+ T =
4 T
8
16
Iron & Steel 11 9
3
Other
14
Rubber & Plastics
Electrical Machinery Manufacturing Productivity change
2
5
17
1
Wood & Furniture
Utilities
0
0 1 2 3 4 5
Total Productivity

27. Labor Reduction & Output Expansion
of productivity change
⎧ ln (Lt ) − ln (Lt+ T )⎫ ⎧ ln(x t+ T ) − ln (xt )⎫
Λ t,t + T =⎨ ⎬+ ⎨ ⎬
⎩ ⎭⎩ ⎭
T T
labor reduction output expansion

28. Output (↑) / Labor (↓)
Mahalanobis Distance
4
• Other Man. (16)
14
16
• Electrical
8
3
Machinery (14)
• Oil Refining (8)
9
11
2
1
22
1
0
0 1 2 3 4
Employment Reduction
Plastic & Rubber (9) and Oil Refining (8)