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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. 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.
  2. Janine Berg & Dante Contreras, 2002. "Political-Economic Regime and the Wage Curve: Evidence from Chile, 1957-96," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2002-10, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  3. Blanchflower, David G & Oswald, Andrew J, 1990. " The Wage Curve," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(2), pages 215-35.
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  5. Badi H. Baltagi & Yusuf Soner Baskaya & Timur Hulagu, 2011. "The Turkish Wage Curve: Evidence from the Household Labor Force Survey," Center for Policy Research Working Papers 134, Center for Policy Research, Maxwell School, Syracuse University.
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  14. Yusuf Soner Baskaya & Timur Hulagu, 2011. "Informal-Formal Worker Wage Gap in Turkey: Evidence From A Semi-Parametric Approach," ERSA conference papers ersa11p409, European Regional Science Association.
  15. 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.
  16. Mazumdar, Dipak, 1976. "The urban informal sector," World Development, Elsevier, vol. 4(8), pages 655-679, August.
  17. 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.
  18. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, October.
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