Unemployment and Trade: Generalized Method of Moments-Dynamic Panel Data Approach for Regions of Turkey

In the study, the relationship between unemployment rates of regions of Turkey and regions’ share in trade volume are analyzed by taking into account annual data of 26 regions that are defined as NUTS2 by Turkish Statistical Institute for the period of 2004-2009. The share of regions in trade volume denotes rate of trade volumes of the cities included by the region in Turkey’s total trade volume. After the necessary tests are applicated to satisfy assumptions, fixed effect panel data and generalized method of moments are used for consistent and efficient estimation. In conclusion, in determining unemployment rates of the regions, positive correlation is found between lag of unemployment rates and related periods’ unemployment rates. Meanwhile, when shares of the regions in trade volume increase, unemployment rates decrease. Also the dummy variables that are indicating the financial global crisis and border trading regions effect after September 2008 are significant.