State Retreat and Trade Openness: Long-Run Impacts on Labor in Turkish Manufacturing

This study examines the long-run effects of export orientation and the public sector’s industrial presence on labor productivity and the labor income share in Turkey. Using annual data for the ISO 500 firms over 1983-2024, the analysis employs the ARDL bounds-testing framework to assess how trade liberalization and the gradual reduction of state participation relate to these outcomes. The study also offers one of the first empirical evaluations linking the contraction of the public sector’s role to changes in labor’s share within large industrial enterprises. The findings indicate stable long-run relationships between export intensity, public-sector presence, labor productivity, and labor share. Export intensity is positively associated with steady-state productivity and with a higher equilibrium labor share. The public sector’s presence shows a more nuanced pattern: although negatively related to long-run productivity, it is positively linked to the labor share. Overall, the results suggest that structural shifts in ownership and market orientation have coincided with changes in productivity dynamics and income distribution across major industrial firms.