Reconsidering the impact of government expenditures on unemployment rate: the Turkish experience (1980-2019)

Abstract

This study uses a novel dual adjustment approach to examine the impact of government expenditure on unemployment in Turkey for the 1980-2019 period. The dual adjustment approach is a powerful method when cointegration is lacking, as is the case in this study. Furthermore, the dual adjustment approach enables the analysis of the double dynamics of long-term and cyclical unemployment. Another contribution of this study is that it examines the distinctive roles of various forms of government expenditure on unemployment rates, such as current, investment. and transfer expenditure. Overall, the results lend empirical support to the Abrams curve hypothesis and Keynesian view. The distinguishing finding of this study is that, by considering the different forms of government expenditure, different results, and hence different policy implications can be derived.