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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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    Cited by:

    1. Özlem Onaran & Nursel Aydiner-Avsar, 2006. "The controversy over employment policy: Low labor costs and openness, or demand policy? A sectoral analysis for Turkey," Department of Economics Working Papers wuwp097, Vienna University of Economics and Business, Department of Economics.
    2. 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, pages 297-315.
    3. repec:ilo:ilowps:467426 is not listed on IDEAS
    4. 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.
    5. Baltagi, Badi H. & Baskaya, Yusuf Soner & Hulagu, Timur, 2012. "The Turkish wage curve: Evidence from the Household Labor Force Survey," Economics Letters, Elsevier, pages 128-131.
    6. 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.
    7. 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.
    8. repec:ilo:ilowps:463375 is not listed on IDEAS
    9. Tropeano, Domenica & Michetti, Elisabetta, 2008. "Exchange rate policy and income distribution in an open developing economy," MPRA Paper 6642, University Library of Munich, Germany.
    10. Yeldan, Erinç. & Ercan, Hakan., 2011. "Growth, employment policies and economic linkages : Turkey," ILO Working Papers 994633753402676, International Labour Organization.
    11. Yeldan, Erinc., 2011. "Macroeconomics of growth and employment : the case of Turkey," ILO Working Papers 994674263402676, International Labour Organization.
    12. 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.

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