ERF 27th Annual Conference
Wage Inequality Dynamics in Turkey
No.
ERF27_91
Publisher
ERF
Date
May, 2021
Topic
C1. Econometric and Statistical Methods and Methodology
J3. Wages, Compensation, and Labor Costs
J2. Demand and Supply of Labor
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 adjustments (2004 and 2016), (ii) a stable aggregate demand curve, (iii) between industry shifts in relative demand, and (iv) relative stagnation of post-secondary graduate wages. The two minimum wage adjustments led to real gains 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 adjustment had a strong wage (pricing) effect over the wage distribution. This impact even spilled over for wage earners above the median. 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. Relative real wage erosion for the upper deciles further contributed to the reduction in inequality in recent years.
Authors
Ozan Bakis
Associate Professor of Economics, Bahçeşehir University
Authors
Sezgin Polat
Professor of Economics, Galatasaray University