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Real Wages and the Business Cycle in Turkey

Author

Listed:
  • Altan Aldan
  • Hatice Burcu Gurcihan Yunculer

Abstract

We analyze the direction and the magnitude of the responsiveness of real wages to the business cycle in Turkey using longitudinal data covering the 2006-2012 period. We find that wages in Turkey are quite procyclical; a 1 percentage point increase in the unemployment rate induces a 0.8 percent decline in real wages. This result can be obtained only if individual heterogeneity is taken into account. We also document wage cyclicality for different groups such as young, low educated, informal workers and job movers. We find a weaker wage response for the low educated and a stronger response for job movers. We also document wage cyclicality along the wage distribution. We find that workers who earn around the minimum wage have acyclical wages. Binding minimum wage suppresses wage cyclicality. For the rest of the distribution wages are highly procyclical.

Suggested Citation

  • Altan Aldan & Hatice Burcu Gurcihan Yunculer, 2016. "Real Wages and the Business Cycle in Turkey," Working Papers 1625, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:1625
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2016/16-25
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    Cited by:

    1. repec:prg:jnlpep:v:preprint:id:677:p:1-16 is not listed on IDEAS
    2. Oguz Atuk & Mustafa Utku Özmen & Cagri Sarikaya, 2018. "A Disaggregated Analysis of the Impact of Output Gap on Inflation and Implications for Monetary Policy," Prague Economic Papers, Prague University of Economics and Business, vol. 2018(6), pages 668-683.

    More about this item

    Keywords

    Turkey; Real wages; Real wage cyclicality;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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