No abstract

Purpose This paper, the first one to use individual-level Turkish panel data, examines the labor market transitions in Turkey along the formal/informal employment divide. The purpose of this paper is to contribute to the limited body of empirical evidence available on mobility and informality in the Turkish labor market. Design/methodology/approach Toward this end, the authors use Turkish income and Living Conditions Survey panel data for 2006, 2007, 2008 and 2009 to compute the Markov transition probabilities of individuals moving across six different labor market states: formal-salaried (FS), informal-salaried, formal self-employed, informal self-employed, unemployed and inactive. In order to examine the nature of mobility patterns in more detail, the authors then estimate six multinomial logit models individually for each transition adopting a number of individual and employment characteristics as explanatory variables. Findings The authors find evidence that mobility patterns are fairly similar across different time spans, the probability of remaining in initial state is higher than the probability of transition into another state for all the labor market states, except for unemployment, there is only very limited mobility into the FS state. Gender, education and sector of economic activity are observed to display significant effects on mobility patterns. The results reveal several relationships between the covariates and likelihood of variant transitions. Research limitations/implications This study provides a comprehensive and detailed diagnosis of the Turkish labor market. The market is observed to display a rather static structure throughout the period considered. The results indicate that a well recognition of underlying dynamics may help policy makers to produce various effective tools for addressing informality. Originality/value First study to analyze labor market mobility across formal/informal sectors using newly available panel data.

In this study, we examine the formal/informal sector earnings differentials in the Turkish labor market using detailed econometric methodologies and a novel panel data set drawn from the 2006-2009 Income and Living Conditions Survey (SILC). In particular, we test if there is evidence of traditional segmented labor markets theory which postulates that informal workers are typically subject to lower remuneration than similar workers in the formal sector. Estimation of standard Mincer earnings equations at the mean using OLS on a pooled sample of workers confirms the existence of an informal penalty, but also shows that almost half of this penalty can be explained by observable variables. Along wage/self-employment divide, our results are in line with the traditional theory that formal-salaried workers are paid significantly higher than their informal counterparts. Confirming the heterogeneity within informal employment, we find that self-employed are often subject to lower remuneration compared to those who are salaried. Moreover, using quantile regression estimations, we show that pay differentials are not uniform along the earnings distribution. More specifically, we find that informal penalty decreases with the earnings level, implying a heterogeneous informal sector with upper-tier jobs carrying a significant premium and lower-tier jobs being largely penalized. Finally, fixed effects estimation of the earnings gap depict that unobserved individual fixed effects when combined with controls for observable individual and employment characteristics explain the pay differentials between formal and informal employment entirely, thereby implying that formal/informal segmentation may not be a stylized fact of the Turkish labor market as previously thought.

In this study, we consider how informality can be defined and measured in the Turkish labor market. The empirical analysis consists of developing three alternative definitions of labor informality, and exploring the relevance and implications of each for the Turkish labor market using descriptive statistics and multivariate probit analysis of the likelihood of informality under each definition. We find that social security registration criterion is a better measure of informality in the Turkish labor market given its ability to capture key relationships between several individual and employment characteristics and the likelihood of informality.

After the subprime meltdown, the Federal Reserve focused its attention on US non-farm payroll data in order to pave the way for its fund rate hikes. As time went by, the Federal Reserve deemed particularly one sub-component of this data, namely the increments on average weekly wage growth as a proxy for inflation and thus a plausible explanation for raising the interest rates. In that aspect, we decide to elaborate on this issue further and examine whether this implemented strategy indeed had a reflection in the real market. For doing so, we intend to determine whether there is any causality relation in either direction between US average weekly wage increases and 10-year Treasury Bond rates. We utilize the Toda-Yamamoto causality approach and come up with a statistically significant result between wages and bond rates. For robustness, we also consider the unemployment rate and consumption expenditures as independent variables.