Wage Inequality Dynamics in Turkey
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...
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Published in | IDEAS Working Paper Series from RePEc |
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Main Authors | , |
Format | Paper |
Language | English |
Published |
St. Louis
Federal Reserve Bank of St. Louis
01.01.2021
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Subjects | |
Online Access | Get full text |
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Summary: | 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. |
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