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

  • Baltagi, Badi H.

    ()

    (Syracuse University)

  • Baskaya, Yusuf Soner

    ()

    (Central Bank of Turkey)

  • Hulagu, Timur

    ()

    (Central Bank of Turkey)

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 significant 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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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6836.

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Length: 20 pages
Date of creation: Sep 2012
Date of revision:
Publication status: published in: Papers in Regional Science, 2013, 92, 271-283.
Handle: RePEc:iza:izadps:dp6836
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  1. Richard Paap & Frank Kleibergen, 2004. "Generalized Reduced Rank Tests using the Singular Value Decomposition," Econometric Society 2004 Australasian Meetings 195, Econometric Society.
  2. Janine Berg & Dante Contreras, 2004. "Political-Economic Regime and the Wage Curve: Evidence from Chile, 1957-96," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(2), pages 151-165.
  3. 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.
  4. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
  5. 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.
  6. David G. Blanchflower & Andrew J. Oswald, 1989. "The Wage Curve," NBER Working Papers 3181, National Bureau of Economic Research, Inc.
    • Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  7. Yusuf Soner Baskaya & Timur Hulagu, 2011. "Informal-Formal Worker Wage Gap in Turkey : Evidence From A Semi-Parametric Approach," Working Papers 1115, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  8. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1.
  9. Pradhan, Menno & van Soest, Arthur, 1995. "Formal and informal sector employment in urban areas of Bolivia," Labour Economics, Elsevier, vol. 2(3), pages 275-297, September.
  10. Ramos, Raul & Duque, Juan C. & Surinach, Jordi, 2010. "Is the wage curve formal or informal? Evidence for Colombia," Economics Letters, Elsevier, vol. 109(2), pages 63-65, November.
  11. 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).
  12. Shilov, Andrey & Möller, Joachim, 2009. "The wage curve in Russia, 1995-2005," Economics Letters, Elsevier, vol. 102(2), pages 90-92, February.
  13. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
  14. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
  15. 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.
  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. Mazumdar, Dipak, 1976. "The urban informal sector," World Development, Elsevier, vol. 4(8), pages 655-679, August.
  18. 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.
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