A Computable General Equilibrium Model for the Organized and Marginal Labor Markets in Turkey 97 A COMPUTABLE GENERAL EQUILIBRIUM MODEL FOR THE ORGANIZED AND MARGINAL LABOR MARKETS IN TURKEY Selahattin Bekmez, University of Idaho Ismail Hakki Genc, University of Idaho P. Lynn Kennedy, Louisiana State University ABSTRACT We consider several economic union scenarios between Turkey and the EU in relation to their impact on the marginal and organized labor markets. We simulate a general equilibrium model to obtain results. We show that wage rate and employment will be positively affected in almost all sectors of the economy with the access into European markets. Organized labor demand, however, tends to increase more than marginal labor demand in most sectors. This shows that the quality of Turkish labor tends to increase with integration. Thus, we propose Turkey should continue its efforts to seek full membership into the European Union. INTRODUCTION Turkey’s entry into a customs union with the European Union (EU) in 1995 raised some important questions. What happens if Turkey’s access to the EU is approved? What kind of policy changes should each country adopt? What are the losses and gains for the EU and Turkey? (For a political analysis, see [10] and [13]). And what kind of social problems will arise, specifically regarding labor issues? The impact of economic integration between Turkey and the EU is most likely to leave a powerful impact on the labor structure in Turkey. To better analyze the whole situation, the EU encouraged a transition period in which Turkey is obligated to lower its tariffs, quotas, and other import duties on products from EU countries. Prior to analyzing labor issues, it is befitting to provide a background on Turkish efforts to achieve membership in the EU and other closely related topics. Although there are pros and cons for Turkey’s accession into the EU, the effort of Turkish officials to join the EU will proceed. After major liberalization efforts by Turkey in the 1980s, the arguments about full membership in the EU has become a priority for Turkey, given that Turkey’s joining the EU will have a strong impact on Turkey’s and the EU’s macroeconomic structure. Since the decisions are made politically, Turkish policy-makers need to know how to concentrate their efforts over the transition period, and produce policies accordingly. As explained in [3], not only the transition economies such as Bulgaria, Romania, and the Slovak Republic, but also most market economies such as Greece, Turkey, Pakistan, and Egypt have very high fiscal deficits. The fragility of the economic development of a country can be determined by its fiscal constraints and the current account balance. Countries that are experiencing a current account balance