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Wage Inequality Dynamics in Turkey

Author

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  • Ozan Bakis

    (Bahçesehir University)

  • Sezgin Polat

    (Galatasaray University)

Abstract

This study aims to examine the evolution of wage inequality in Turkey between 2002 and 2019 using Household Labor Force Surveys. We find a significant decline in wage inequality over the period analyzed, which can be explained by a combination of (i) minimum wage hikes (2004 and 2016), (ii) a stable aggregate demand curve, and (iii) relative stagnation of post-secondary graduate wages. The two minimum wage hikes led to real gains that were preserved over the years for lower wage earners and reduced the wage gap between upper and lower percentiles. The decomposition analysis based on DiNardo et al. (1996) shows that minimum wage hikes had a strong wage (price) effect over the wage distribution. This impact even spilled over for wage earners above the minimum wage. We argue that minimum wage adjustments replace the role of central wage bargaining in an emerging economy with many low qualified jobs and almost no labor market institutions. The stagnating real wages for the upper deciles contributed further to the reduction in inequality in recent years.

Suggested Citation

  • Ozan Bakis & Sezgin Polat, 2021. "Wage Inequality Dynamics in Turkey," Working Papers 1509, Economic Research Forum, revised 20 Nov 2021.
    • Handle: RePEc:erg:wpaper:1509
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    2. Aracı, Doğu Tan & Demirci, Murat & Kırdar, Murat Güray, 2022. "Development level of hosting areas and the impact of refugees on natives’ labor market outcomes in Turkey☆," European Economic Review, Elsevier, vol. 145(C).

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    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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