Wage Inequality Dynamics in Turkey

Ozan Bakis and Sezgin Polat

No 1509, Working Papers from Economic Research Forum

Abstract: This study aims to examine the evolution of wage inequality in Turkey between 2002 and 2019 using Household Labor Force Surveys. We find a significant decline in wage inequality over the period analyzed, which can be explained by a combination of (i) minimum wage hikes (2004 and 2016), (ii) a stable aggregate demand curve, and (iii) relative stagnation of post-secondary graduate wages. The two minimum wage hikes led to real gains that were preserved over the years for lower wage earners and reduced the wage gap between upper and lower percentiles. The decomposition analysis based on DiNardo et al. (1996) shows that minimum wage hikes had a strong wage (price) effect over the wage distribution. This impact even spilled over for wage earners above the minimum wage. We argue that minimum wage adjustments replace the role of central wage bargaining in an emerging economy with many low qualified jobs and almost no labor market institutions. The stagnating real wages for the upper deciles contributed further to the reduction in inequality in recent years.

Pages: 42
Date: 2021-11-20, Revised 2021-11-20
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Published by The Economic Research Forum (ERF)

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Journal Article: Wage inequality dynamics in Turkey (2023)
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