This study is an attempt to analyze optimal informal employment ratio for Turkish economy. Informal employment has advantages and disadvantages and there is a study that 1 point increase at informal employment increases the economic growth 0,23 point for Turkish economy. Informal employment causes revenue losses consisting of both tax and social security premium. But also it causes economic growth. In the study, the relationship between the Gross Domestic Product (GDP) and informal employment ratio (IER) for Turkish economy will be analyzed. Monthly data covering the period between January 2005 and December 2013 from TUIK (Turkish Statistics Institution) were used in the study. The model will be estimated using Engle-Granger Two-Step Estimation Procedure. By the model; at first the relationship between the informal employment ratio and the GDP will be tried to assess the optimal informal employment ratio for Turkish economy and where the Turkish economy stands according to this ratio and the gain of the economy at this optimum rate respectively.
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