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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. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, National Bureau of Economic Research, Inc, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
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  3. David Card, 1995. "The Wage Curve: A Review," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 722, Princeton University, Department of Economics, Industrial Relations Section..
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  6. Baltagi, Badi H. & Baskaya, Yusuf Soner & Hulagu, Timur, 2011. "The Turkish Wage Curve: Evidence from the Household Labor Force Survey," IZA Discussion Papers 5633, Institute for the Study of Labor (IZA).
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  8. Ramos, Raul & Duque, Juan C. & Surinach, Jordi, 2010. "Is the wage curve formal or informal? Evidence for Colombia," Economics Letters, Elsevier, Elsevier, vol. 109(2), pages 63-65, November.
  9. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, Elsevier, vol. 133(1), pages 97-126, July.
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  11. Pradhan, M.P. & Soest, A.H.O. van, 1993. "Formal and informal sector employment in urban areas of Bolivia," Discussion Paper, Tilburg University, Center for Economic Research 1993-11, Tilburg University, Center for Economic Research.
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  13. Maloney, William, 2003. "Informality revisited," Policy Research Working Paper Series, The World Bank 2965, The World Bank.
  14. Gong, Xiaodong & Van Soest, Arthur & Villagomez, Elizabeth, 2004. "Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico," Economic Development and Cultural Change, University of Chicago Press, University of Chicago Press, vol. 53(1), pages 1-36, October.
  15. Mazumdar, Dipak, 1976. "The urban informal sector," World Development, Elsevier, Elsevier, vol. 4(8), pages 655-679, August.
  16. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number minc74-1.
  17. Shilov, Andrey & Möller, Joachim, 2009. "The wage curve in Russia, 1995-2005," Economics Letters, Elsevier, Elsevier, vol. 102(2), pages 90-92, February.
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  19. Aysit Tansel, 1999. "Formal Versus Informal Sector Choice of Wage Earners and their Wages in Turkey," Working Papers, Economic Research Forum 9927, Economic Research Forum, revised Sep 1999.
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Cited by:
  1. Afsin Sahin & Aysit Tansel & M. Hakan Berument, 2013. "Output-Employment Relationship across Sectors: A Long- versus Short-Run Perspective," Koç University-TUSIAD Economic Research Forum Working Papers, Koc University-TUSIAD Economic Research Forum 1311, Koc University-TUSIAD Economic Research Forum.
  2. Becker, Dennis, 2014. "Heterogeneous Firms and Informality: The Effects of Trade Liberalization on Labor Markets," Working Papers, Cornell University, Department of Applied Economics and Management 180124, Cornell University, Department of Applied Economics and Management.

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