Real Wages and the Business Cycle in Turkey

Real Wages and the Business Cycle in Turkey

Title:

Real Wages and the Business Cycle in Turkey

Number:

16/25

Author(s):

Altan Aldan, H. Burcu Gürcihan Yüncüler

Language:

English

Date:

November 2016

Abstract:

We analyze the direction and the magnitude of the responsiveness of real wages to the business cycle in Turkey using longitudinal data covering the 2006-2012 period. We find that wages in Turkey are quite procyclical; a 1 percentage point increase in the unemployment rate induces a 0.8 percent decline in real wages. This result can be obtained only if individual heterogeneity is taken into account. We also document wage cyclicality for different groups such as young, low educated, informal workers and job movers. We find a weaker wage response for the low educated and a stronger response for job movers. We also document wage cyclicality along the wage distribution. We find that workers who earn around the minimum wage have acyclical wages. Binding minimum wage suppresses wage cyclicality. For the rest of the distribution wages are highly procyclical.

Keywords:

Turkey, Real wages, Real wage cyclicality

JEL Codes:

J30; E23; E26; E32

Real Wages and the Business Cycle in Turkey
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