Intensive Margin and Extensive Margin Adjustments of Labor Market : Turkey versus United States

In this paper, we document the intensive and extensive margin adjustments of labor market in Turkey and US. We find that both margins are important. More interestingly, the weight of intensive margin adjustment does not differ substantially between the two countries. Common wisdom and some theory would expect these countries to divert from each other significantly, because they represent two extreme points of labor market flexibility. A possible explanation for this result is the sizable informal sector and self employment in Turkey as it might reduce the large hiring and firing costs and encourage firms towards extensive margin adjustment.