Welfare Impact of the Global Financial Crisis of 2008-2009 on Turkish Households

This paper looks at how the macro-shock from the 2008 financial crisis has translated into income and welfare shocks in the form of reduced earnings and consumption at the household level in Turkey. Using a specialized household level Welfare Monitoring Survey implemented in May-June 2009 in seven Turkish provinces, the paper first establishes a link between the province- level shock and the changes in earnings at the household level. Secondly, using an instrumental-variables strategy, it establishes the link between the earnings reduction and changes in consumption. The main findings in the paper are that informally employed workers, and those with lower levels of education, were most likely to be hurt by the crisis. In terms of human- development investments at the household level, the paper finds that food expenditures acted as the main adjustment mechanism in the face of the in- come shock, while education and health expenditures remained relatively stable. The probability of reducing food consumption (and the amount of food provided to children) was highest among the poor that initially had low levels of household assets.