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

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Listed:
  • Badi H. Baltagi
  • Yusuf Soner Baskaya
  • Timur Hulagu

Abstract

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 signifcant 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.

Suggested Citation

  • Badi H. Baltagi & Yusuf Soner Baskaya & Timur Hulagu, 2012. "How Different are the Wage Curves for Formal and Informal Workers? Evidence from Turkey," Working Papers 1216, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  • Handle: RePEc:tcb:wpaper:1216
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Badi H. Baltagi & Bartlomiej Rokicki & Kênia Barreiro Souza, 2017. "The Brazilian wage curve: new evidence from the National Household Survey," Empirical Economics, Springer, vol. 53(1), pages 267-286, August.
    2. Afşin Şahin & Aysit Tansel & M. Hakan Berument, 2015. "Output–Employment Relationship Across Sectors: A Long- Versus Short-Run Perspective," Bulletin of Economic Research, Wiley Blackwell, vol. 67(3), pages 265-288, July.
    3. Kazuyuki Inagaki, 2015. "Wage curve in dual labor markets: cross-sectional evidence from Japan," Economics and Business Letters, Oviedo University Press, vol. 4(2), pages 51-56.
    4. Joan Daouli & Michael Demoussis & Nicholas Giannakopoulos & Ioannis Laliotis, 2017. "The wage curve before and during the Greek economic crisis," Empirical Economics, Springer, vol. 52(1), pages 59-77, February.
    5. Ana Barufi & Eduardo Haddad & Peter Nijkamp, 2016. "A comprehensive analysis of the wage curve in Brazil: Non-linearities, urban size, and the spatial dimension," ERSA conference papers ersa16p279, European Regional Science Association.
    6. Ana Maria Bonomi Barufi & Eduardo A. Haddad, Peter Nijkamp, 2016. "New evidence on the wage curve: non-linearities, urban size, and spatial scale in Brazil," Working Papers, Department of Economics 2016_39, University of São Paulo (FEA-USP).
    7. Becker, Dennis, 2014. "Heterogeneous Firms and Informality: The Effects of Trade Liberalization on Labor Markets," Working Papers 180124, Cornell University, Department of Applied Economics and Management.

    More about this item

    Keywords

    Formal/Informal Employment; Wage Curve; Regional Labor Markets;

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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