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How Different are the Wage Curves for Formal and Informal Workers? Evidence from Turkey

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  • Badi H. Baltagi
  • Yusuf Soner Baskaya
  • Timur Hulagu

Abstract

This paper presents wage curves for formal and informal workers using a rich individual level data for Turkey over the period 2005-2009. The wage curve is an empirical regularity describing a negative relationship between regional unemployment rates and individuals' real wages. While this relationship has been well documented for a number of countries including Turkey, less attention has focused on how this relationship differs for informal versus formal employment. This is of utmost importance for less developed countries where informal employment plays a signifcant role in the economy. Using the Turkish Household Labor Force Survey observed over 26 NUTS-2 regions, we find that real hourly wages of informal workers in Turkey are more sensitive to variations in regional unemployment rates than wages of formal workers. This is true for all workers as well as for different gender and age groups.

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Bibliographic Info

Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 1216.

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Date of creation: 2012
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Handle: RePEc:tcb:wpaper:1216

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Keywords: Formal/Informal Employment; Wage Curve; Regional Labor Markets;

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References

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  1. Badi H. Baltagi & Yusuf Soner Baskaya & Timur Hulagu, 2011. "The Turkish Wage Curve : Evidence from the Household Labor Force Survey (Türkiye’de Ücret Egrisi: Hanehalki Isgücü Anketi’nden Bulgular)," Working Papers 1106, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  2. Blanchflower, David G & Oswald, Andrew J, 1990. " The Wage Curve," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(2), pages 215-35.
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  3. Ramos, Raul & Duque, Juan Carlos & Surinach, Jordi, 2009. "Is the Wage Curve Formal or Informal? Evidence for Colombia," IZA Discussion Papers 4461, Institute for the Study of Labor (IZA).
  4. Baltagi, Badi H. & Blien, Uwe, 1998. "The German wage curve: evidence from the IAB employment sample," Economics Letters, Elsevier, vol. 61(2), pages 135-142, November.
  5. Pratap, Sangeeta & Quintin, Erwan, 2006. "Are labor markets segmented in developing countries? A semiparametric approach," European Economic Review, Elsevier, vol. 50(7), pages 1817-1841, October.
  6. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  7. Maloney, William, 2003. "Informality revisited," Policy Research Working Paper Series 2965, The World Bank.
  8. Pradhan, M.P. & Soest, A.H.O. van, 1993. "Formal and informal sector employment in urban areas of Bolivia," Discussion Paper 1993-11, Tilburg University, Center for Economic Research.
  9. Janine Berg & Dante Contreras, 2002. "Political-Economic Regime and the Wage Curve: Evidence from Chile, 1957-96," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2002-10, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
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  11. Mazumdar, Dipak, 1976. "The urban informal sector," World Development, Elsevier, vol. 4(8), pages 655-679, August.
  12. Kleibergen, F.R. & Paap, R., 2003. "Generalized Reduced Rank Tests using the Singular Value Decomposition," Econometric Institute Research Papers EI 2003-01, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  13. Shilov, Andrey & Möller, Joachim, 2009. "The wage curve in Russia, 1995-2005," Economics Letters, Elsevier, vol. 102(2), pages 90-92, February.
  14. Gong, X. & Soest, A.H.O. van & Villagomez, E., 2000. "Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico," Discussion Paper 2000-46, Tilburg University, Center for Economic Research.
  15. David G. Blanchflower & Andrew Oswald, 1995. "International Wage Curves," NBER Chapters, in: Differences and Changes in Wage Structures, pages 145-174 National Bureau of Economic Research, Inc.
  16. Aysit Tansel, 1999. "Formal Versus Informal Sector Choice of Wage Earners and their Wages in Turkey," Working Papers 9927, Economic Research Forum, revised Sep 1999.
  17. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, May.
  18. Yusuf Soner Baskaya & Timur Hulagu, 2011. "Informal-Formal Worker Wage Gap in Turkey: Evidence From A Semi-Parametric Approach," ERSA conference papers ersa11p409, European Regional Science Association.
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Cited by:
  1. Sahin, Afsin & Tansel, Aysit & Berument, Hakan, 2013. "Output-Employment Relationship across Sectors: A Long- versus Short-Run Perspective," IZA Discussion Papers 7599, Institute for the Study of Labor (IZA).

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