ECONOMIC INACTIVITY: SUGGESTIONS FOR TAPPING THE POOL OF POTENTIAL LABOUR FORCE IN EUROPE AND TÜRKİYE

Labour force shortages are persistent labour market problems of both Europe and Türkiye although there is a significant pool of inactive people not participating in the labour force. Analyzing every aspect of ‘being out of labour force’ status of working age population in a country has great importance for monitoring labour market cycles, since shifts in participation in the labour force is a key determinant of economic growth. Having a direct causality with growth, empirical field literature generally focuses on unemployment segment of the labour force whereas people that are out of labour force are in some cases close in numbers to the unemployed and even more than unemployed in some other cases. Therefore the transition of people from ‘inactive but willing to work’ status to ‘active’ labour force is of vital importance. This study, motivated by these considerations, aims to fill a gap in the literature employing a model where we tested the effects of social protection expenditures per capita and GDP per capita on five different economic inactivity indicators across European countries and Türkiye in 2010-2022 using panel data techniques. Our findings indicate that cause-specific and fine-tuned policies can induce transition from inactive status to active labour force.