2016
DOI: 10.1111/irel.12135
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Firm‐Size Wage Gaps along the Formal‐Informal Divide: Theory and Evidence

Abstract: Observationally equivalent workers are paid higher wages in larger firms. This fact is often named as the "firm-size wage gap" and is regarded as a key empirical puzzle. Using micro-level data from Turkey, we document a new stylized fact: the firm-size wage gap is more pronounced for informal (unregistered) jobs than for formal (registered) jobs. To explain this fact, we develop a two-stage wage-posting game with market imperfections and segmented markets, the solution to which produces wages as a function of … Show more

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Cited by 6 publications
(6 citation statements)
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References 59 publications
(87 reference statements)
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“…Such a policy design might manifest itself as an increase in toleration for at least some informal economic activities or should at least take into account how a reduction 5 See Elgin (2012) for other estimates of informal sector size for the Turkish economy from the existing literature on the Turkish economy. 6 Tansel (1999Tansel ( , 2001, Savasan and Schneider (2006), Taymaz (2009), Tansel and Kan (2012a, 2012b, Acar and Tansel (2014), and Balkan and Tümen (2014) are among the examples. 7 Maloney (1999), Pisani and Pagán (2004), Bucheli and Ceni (2010), Kaplan, Piedra, and Seira (2011), and more recently, Cantekin and Elgin (2017), are among the examples.…”
Section: Informality In the Turkish Economymentioning
confidence: 99%
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“…Such a policy design might manifest itself as an increase in toleration for at least some informal economic activities or should at least take into account how a reduction 5 See Elgin (2012) for other estimates of informal sector size for the Turkish economy from the existing literature on the Turkish economy. 6 Tansel (1999Tansel ( , 2001, Savasan and Schneider (2006), Taymaz (2009), Tansel and Kan (2012a, 2012b, Acar and Tansel (2014), and Balkan and Tümen (2014) are among the examples. 7 Maloney (1999), Pisani and Pagán (2004), Bucheli and Ceni (2010), Kaplan, Piedra, and Seira (2011), and more recently, Cantekin and Elgin (2017), are among the examples.…”
Section: Informality In the Turkish Economymentioning
confidence: 99%
“…Tansel (, ), Savasan and Schneider (), Taymaz (), Tansel and Kan (, ), Acar and Tansel (), and Balkan and Tümen () are among the examples.…”
mentioning
confidence: 99%
“…Other explanations for the relationship are discussed in a more recent study by Balkan and Tumen (2016). These include the explanations provided by Brown and Medoff (1989), as well as unobserved firm productivity (Idson and Oi, 1999), data deficiencies (Troske, 1999) and firm-level differences in labor turnover due to different human resource management practices (Idson, 1996).…”
Section: Prior Literature: a Brief Reviewmentioning
confidence: 99%
“…In doing so, the study finds that large firms pay higher wages, a finding explained by latent employee skills (Scoppa, 2014). Balkan and Tumen (2016) examine the firm size-wage gap using micro-data from Turkey. They find that the firm size-wage gap is more pronounced for informal (unregistered) jobs than for formal (registered) jobs.…”
Section: Prior Literature: a Brief Reviewmentioning
confidence: 99%
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