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Exploring different measures of wage flexibility in a developing economy context: the case for Turkey

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  • Ipek Ilkkaracan
  • Haluk Levent
  • Sezgin Polat
Abstract
In this paper we use Turkish household labor force data to address a number of conceptual issues pertaining to the wage curve, an empirically derived negative relationship between the real wage level and the local unemployment rate. First, we show that in developing economies where labor markets are prone to high degree of segmentation by skill level, local unemployment rates disaggregated by education provide more accurate measures of the degree of group-specific wage competition and hence yield more robust results of the wage curve analyses. Second, we estimate the wage curve using various definitions of the unemployment rate, including discouraged and marginally attached workers, and the long-term unemployment rate to explore the most relevant measure of local labor market tension in the wage setting process. We find that broader definitions of unemployment serve as a more effective reference point in measuring wage flexibility for women, whose attachment to the labor market is substantially weak in the Turkish context; while for men the official and long-term unemployment rates perform well. Finally, using quantile regression we show that wage responsiveness to unemployment cannot be assumed to be constant along the wage distribution. In the Turkish case, we find a higher unemployment elasticity of wages around the median segment of wage distribution. This effect is more pronounced for women.

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  • Ipek Ilkkaracan & Haluk Levent & Sezgin Polat, 2013. "Exploring different measures of wage flexibility in a developing economy context: the case for Turkey," International Review of Applied Economics, Taylor & Francis Journals, vol. 27(3), pages 297-315, May.
    • Handle: RePEc:taf:irapec:v:27:y:2013:i:3:p:297-315
    DOI: 10.1080/02692171.2012.721754
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    Cited by:

    1. Haci Mevlut Karatas, 2017. "The Turkish Spatial Wage Curve," Econometrics, MDPI, vol. 5(3), pages 1-21, August.
    2. Seçil KAYA BAHÇE & Emel MEMİŞ, 2014. "The Uncounted Who Wish to Work – Distinct to the Unemployed or Similar?," Sosyoekonomi Journal, Sosyoekonomi Society, issue 21(21).
    3. Seçil A Kaya Bahçe & Emel Memiş, 2014. "The impact of the economic crisis on joblessness in Turkey," The Economic and Labour Relations Review, , vol. 25(1), pages 130-153, March.

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    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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