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Measuring wage flexibility: the case of Turkey before and after structural adjustment

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  • Ozlem Onaran

Abstract

This article presents an empirical analysis of wage flexibility in the formal private sector in Turkey. The analysis is based on a wage bargaining model that links the nominal wage demands to labour market conditions, which are proxied by the rate of unemployment; productivity improvements; and price expectations. The model is estimated on the basis of panel data of the formal private manufacturing industry; and changes in the wage setting mechanism as the country shifts from an import substituting industrialization strategy to an export-oriented growth regime are discussed. This debate is particularly important in terms of its policy implications, and is relevant to current international discussions of the role of labour markets during structural adjustment. In most economic policy discussions, unemployment is assumed to be a labour market rigidity problem. The results of this article, however, suggest that increased flexibility of wages leaves little room for such arguments. In the light of these findings, the prospect of wage rigidity becomes immaterial, and a focus on the structural problems of the economy, which are outside the labour market, becomes central.

Suggested Citation

  • Ozlem Onaran, 2002. "Measuring wage flexibility: the case of Turkey before and after structural adjustment," Applied Economics, Taylor & Francis Journals, vol. 34(6), pages 767-781.
    • Handle: RePEc:taf:applec:v:34:y:2002:i:6:p:767-781
    DOI: 10.1080/00036840110056934
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    References listed on IDEAS

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    1. Erin Yeldan & Kivilcim Metin-…zcan & Ebru Voyvoda, 1999. "Dynamics of Macroeconomic Adjustment in a Globalized Developing Economy : Growth, Accumulation and Distribution, Turkey 1969-1998," Working Papers 9905, Department of Economics, Bilkent University.
    2. Riveros, Luis A., 1990. "Chile's labor markets in an era of adjustment," Policy Research Working Paper Series 404, The World Bank.
    3. Riveros, Luis A. & Sanchez, Carlos E., 1990. "Argentina's labor markets in an era of adjustment," Policy Research Working Paper Series 386, The World Bank.
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    1. Baltagi, Badi H. & Baskaya, Yusuf Soner & Hulagu, Timur, 2012. "The Turkish wage curve: Evidence from the Household Labor Force Survey," Economics Letters, Elsevier, vol. 114(1), pages 128-131.
    2. Erik Dietzenbacher & Gülay Günlük-Şenesen, 2003. "Demand-Pull and Cost-Push Effects on Labor Income in Turkey, 1973–90," Environment and Planning A, , vol. 35(10), pages 1785-1807, October.
    3. Ipek Ilkkaracan & Raziye Selim, 2003. "The role of unemployment in wage determination: further evidence on the wage curve from Turkey," Applied Economics, Taylor & Francis Journals, vol. 35(14), pages 1589-1598.
    4. Baltagi, Badi H. & Baskaya, Yusuf Soner & Hulagu, Timur, 2012. "The Turkish wage curve: Evidence from the Household Labor Force Survey," Economics Letters, Elsevier, vol. 114(1), pages 128-131.
    5. Fei Peng & Sajid Anwar & Lili Kang, 2020. "Job Movement and Real Wage Flexibility in Eastern and Western Parts of Germany," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 44(4), pages 764-789, October.
    6. repec:ilo:ilowps:463375 is not listed on IDEAS
    7. Tropeano, Domenica & Michetti, Elisabetta, 2008. "Exchange rate policy and income distribution in an open developing economy," MPRA Paper 6642, University Library of Munich, Germany.
    8. Yeldan, Erinç. & Ercan, Hakan., 2011. "Growth, employment policies and economic linkages : Turkey," ILO Working Papers 994633753402676, International Labour Organization.
    9. Nursel AYDINER‐AVSAR & ÖZlem ONARAN, 2010. "The Determinants Of Employment: A Sectoral Analysis For Turkey," The Developing Economies, Institute of Developing Economies, vol. 48(2), pages 203-231, June.
    10. Ipek Ilkkaracan & Haluk Levent & Sezgin Polat, 2013. "Exploring different measures of wage flexibility in a developing economy context: the case for Turkey," International Review of Applied Economics, Taylor & Francis Journals, vol. 27(3), pages 297-315, May.
    11. Thomas Gruber, 2004. "Employment and Labor Market Flexibility in the New EU Member States," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 96-121.
    12. repec:ilo:ilowps:467426 is not listed on IDEAS
    13. Özlem Onaran, 2006. "Speculation-led growth and fragility in Turkey: Does EU make a difference or "can it happen again"?," Department of Economics Working Papers wuwp093, Vienna University of Economics and Business, Department of Economics.
    14. Erol Taymaz & Sule Ozler, 2004. "Labor Market Policies and EU Accession: Problems and Prospects for Turkey," ERC Working Papers 0405, ERC - Economic Research Center, Middle East Technical University, revised Mar 2004.
    15. Sayın San & Özgür Polat, 2012. "Estimation of Public–Private Wage Differentials in T urkey with Sample Correction," The Developing Economies, Institute of Developing Economies, vol. 50(3), pages 285-298, September.
    16. Lili Kang & Fei Peng, 2017. "Wage flexibility in the Chinese labour market, 1989–2009," Regional Studies, Taylor & Francis Journals, vol. 51(4), pages 616-628, April.
    17. Yeldan, Erinc., 2011. "Macroeconomics of growth and employment : the case of Turkey," ILO Working Papers 994674263402676, International Labour Organization.

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