THE EFFECT OF INVESTMENT INCENTIVES ON EMPLOYMENT: A STUDY SPECIFICALLY FOR TURKIYE

The acceleration of global capital movements has increased investment competition among countries and highlighted the guiding role of public policies. In this context, investment incentives are used as a strategic tool to ensure the sustainability of economic growth, increase employment, and expand export volume, especially in developing economies. In this study, the impact of investment incentives on employment was analyzed econometrically using monthly time series data for the Turkish economy (2013-2024) along with control variables (industrial production index, real exchange rate, consumer price index, and Covid-19). During the analysis process, various econometric tests and methods were used to evaluate the statistical properties of the series used and to ensure model validity. First, the ADF (Augmented Dickey-Fuller) unit root test was applied to determine the stationarity levels of the series. For non-stationary series, the Johansen cointegration test was performed in multivariate systems to test the existence of long-run relationships. In models with cointegration relationships, both long-term and short-term coefficients were obtained using the VECM (Vector Error Correction Model) estimation method. To ensure the validity of the estimated model, the Breusch-Godfrey LM test was applied to test for autocorrelation in residual terms, and the White heteroskedasticity test was applied to identify heteroskedasticity problems.

The study found that investment incentives, contrary to expectations, have negative effects on employment, and in some cases, technological investments reduce labor demand. The coefficient of the number of investment incentive certificates variable in the model is -0.1092, significant at the 1% level. This indicates that a 1% increase in the number of investment incentive certificates reduces employment by approximately 0.11% in the long-term. The results demonstrate the need to restructure incentive policies, taking into account their sectoral and social impacts. The industrial production index, the CPI, and the value of the real exchange rate, all included in the model, have a statistically significant and positive impact on employment. Finally, the Dummy2020M3 variable representing the Covid-19 pandemic was not found to be statistically significant. This result suggests that the pandemic either did not have a lasting impact on employment in the long term or its impact diminished over time.