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This paper analyzes the effects of wages, openness, and demand on employment in the private manufacturing industry in Turkey based on panel data for the period of 1973–2001. The wage elasticity of employment increases after trade liberalization. Nevertheless, output elasticity of labor demand is higher than wage elasticity in the total manufacturing sector for the whole estimation period, and in the high‐ and medium‐skilled sectors in the post‐1980 period. Trade effects, after controlling for output, seem to have a low economic significance. The positive effects of exports on the labor intensity of production are low or are offset by labor saving effects of foreign trade, particularly in the high‐ and medium‐skilled sectors. On the other hand, there is some evidence of a negative import effect in the low‐skilled sectors, whereas in the high‐ and medium‐skilled group a complementary relation between domestic labor and imported inputs dominates the effects.
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