Labor Mobility across the Formal/Informal Divide in Turkey: Evidence from Individual Level Data

Informality has long been a salient phenomenon in developing country labor markets, thus has been addressed in several theoretical and empirical research. Turkey, given its economic and demographic dynamics, provides rich evidence for a growing, heterogeneous and multifaceted informal labor market. However, the existing evidence on labor informality in Turkey is mixed and scant. Along these lines, we aim to extend the existing literature by providing a diagnosis of dynamic worker flows across distinct labor market states and identifying the effects of certain individual and job characteristics on variant mobility patterns. More specifically, we first develop and discuss a set of probability statistics based on annual worker transitions across distinct employment states utilizing Markov transition processes. As Bosch and Maloney (2007:3) argue: "labor status mobility can be assumed as a process in which changes in the states occur randomly through time, and probabilities of moves between particular states are governed by Markov transition matrices". Towards this end, we will use the novel Income and Living Conditions Survey (SILC) panel data set to compute the transition probabilities of individuals moving across the labor market states of formal-salaried, informal-salaried, formal self-employed, informal self-employed, unemployed and inactive. The transitions analysis is conducted separately for two, three and four year panels pertaining to 2006 to 2007, 2006 to 2008 and 2006 to 2009 transitions; for total, male and female samples; and lastly for total and non-agricultural samples. In this way, we aim to contribute to the limited body of stylized facts available on mobility and informality in the Turkish labor market. Next, we conduct multinomial logit regressions individually for each set of panel to identify the impact of individual characteristics (i.e. gender, age, education level, work experience, sector of economic activity, firm size, number of other household members, having/not having children, rural/urban) underlying worker transitions. The results reveal several relationships between the covariates and likelihood of variant transitions, and are of remarkable importance for designing policy to address labor informality and reduce its negative externalities.labor market dynamics, informality, Markov processes, multinomial logit, Turkey

Labor Mobility across the Formal/Informal Divide in Turkey: Evidence from Individual Level Data

Informality has long been a salient phenomenon in developing country labor markets, thus has been addressed in several theoretical and empirical research. Turkey, given its economic and demographic dynamics, provides rich evidence for a growing, heterogeneous and multifaceted informal labor market. However, the existing evidence on labor informality in Turkey is mixed and scant. Along these lines, we aim to extend the existing literature by providing a diagnosis of dynamic worker flows across distinct labor market states and identifying the effects of certain individual and job characteristics on variant mobility patterns. More specifically, we first develop and discuss a set of probability statistics based on annual worker transitions across distinct employment states utilizing Markov transition processes. As Bosch and Maloney (2007:3) argue: “labor status mobility can be assumed as a process in which changes in the states occur randomly through time, and probabilities of moves between particular states are governed by Markov transition matrices”. Towards this end, we will use the novel Income and Living Conditions Survey (SILC) panel data set to compute the transition probabilities of individuals moving across the labor market states of formal-salaried, informal-salaried, formal self-employed, informal self-employed, unemployed and inactive. The transitions analysis is conducted separately for two, three and four year panels pertaining to 2006 to 2007, 2006 to 2008 and 2006 to 2009 transitions; for total, male and female samples; and lastly for total and non-agricultural samples. In this way, we aim to contribute to the limited body of stylized facts available on mobility and informality in the Turkish labor market. Next, we conduct multinomial logit regressions individually for each set of panel to identify the impact of individual characteristics (i.e. gender, age, education level, work experience, sector of economic activity, firm size, number of other household members, having/not having children, rural/urban) underlying worker transitions. The results reveal several relationships between the covariates and likelihood of variant transitions, and are of remarkable importance for designing policy to address labor informality and reduce its negative externalities.Labor market dynamics, informality, Markov processes, multinomial logit, Turkey

Labor Mobility Across The Formal/Informal Divide in Turkey: Evidence From Individual Level Data

Informality has long been a salient phenomenon in developing country labor markets, thus has been addressed in several theoretical and empirical research. Turkey, given its economic and demographic dynamics, provides rich evidence for a growing, heterogeneous and multifaceted informal labor market. However, the existing evidence on labor informality in Turkey is mixed and scant. Along these lines, we aim to extend the existing literature by providing a diagnosis of dynamic worker flows across distinct labor market states and identifying the effects of certain individual and job characteristics on variant mobility patterns. More specifically, we first develop and discuss a set of probability statistics based on annual worker transitions across distinct employment states utilizing Markov transition processes. As Bosch and Maloney (2007:3) argue: “labor status mobility can be assumed as a process in which changes in the states occur randomly through time, and probabilities of moves between particular states are governed by Markov transition matrices”. Towards this end, we will use the novel Income and Living Conditions Survey (SILC) panel data set to compute the transition probabilities of individuals moving across the labor market states of formal-salaried, informal-salaried, formal self-employed, informal self-employed, unemployed and inactive. The transitions analysis is conducted separately for two, three and four year panels pertaining to 2006 to 2007, 2006 to 2008 and 2006 to 2009 transitions; for total, male and female samples; and lastly for total and non-agricultural samples. In this way, we aim to contribute to the limited body of stylized facts available on mobility and informality in the Turkish labor market. Next, we conduct multinomial logit regressions individually for each set of panel to identify the impact of individual characteristics (i.e. gender, age, education level, work experience, sector of economic activity, firm size, number of other household members, having/not having children, rural/urban) underlying worker transitions. The results reveal several relationships between the covariates and likelihood of variant transitions, and are of remarkable importance for designing policy to adress labor informality and reduce its negative externalities.Labor market dynamics, informality, Markov processes, multinomial logit, Turkey

Labor mobility across the formal/informal divide in Turkey: evidence from individual level data

Informality has long been a salient phenomenon in developing country labor markets, thus has been addressed in several theoretical and empirical research. Turkey, given its economic and demographic dynamics, provides rich evidence for a growing, heterogeneous and multifaceted informal labor market. However, the existing evidence on labor informality in Turkey is mixed and scant. Along these lines, we aim to extend the existing literature by providing a diagnosis of dynamic worker flows across distinct labor market states and identifying the effects of certain individual and job characteristics on variant mobility patterns. More specifically, we first develop and discuss a set of probability statistics based on annual worker transitions across distinct employment states utilizing Markov transition processes. As Bosch and Maloney (2007:3) argue: “labor status mobility can be assumed as a process in which changes in the states occur randomly through time, and probabilities of moves between particular states are governed by Markov transition matrices”. Towards this end, we will use the novel Income and Living Conditions Survey (SILC) panel data set to compute the transition probabilities of individuals moving across the labor market states of formal-salaried, informal-salaried, formal self-employed, informal self-employed, unemployed and inactive. The transitions analysis is conducted separately for two, three and four year panels pertaining to 2006 to 2007, 2006 to 2008 and 2006 to 2009 transitions; for total, male and female samples; and lastly for total and non-agricultural samples. In this way, we aim to contribute to the limited body of stylized facts available on mobility and informality in the Turkish labor market. Next, we conduct multinomial logit regressions individually for each set of panel to identify the impact of individual characteristics (i.e. gender, age, education level, work experience, sector of economic activity, firm size, number of other household members, having/not having children, rural/urban) underlying worker transitions. The results reveal several relationships between the covariates and likelihood of variant transitions, and are of remarkable importance for designing policy to adress labor informality and reduce its negative externalities.Labor market dynamics, informality, Markov processes, multinomial logit, Turkey

Empirical Issues And Examples: Growth Theory

This paper deals with the growth literature. In particular our fundamental concern in this paper will be the empirical studies which are held nowadays. For this purpose, we will mainly base our study on a recent paper called as “The New Growth Evidence” which was written out by J. Temple (2000) who gives a very detailed discussion of the empirical issues concerning the growth literature. In this work we will not only be giving his paper’s brief summary but also will be pointing out the borders of growth theory with a number of specific examples of empirical studies in growth literature. In this respect, we will organize three types of empirical analysis which are achieved by different estimation procedures. In the first example, we will deal with cross country evidence in which we aim to point out the growth differences between developed and underdeveloped countries. In order to show these differences we will gather data about fifty countries and make cross section analysis in between. We will then use Chow methodology to pinpoint the structural break between developed and underdeveloped countries. In the second example, we will provide a time series analysis of one country, in which we intend to find out whether a country’s productivity level does or does not affect the GNP growth rate. Last and the third example will be given from a panel data analysis, in which we will take the same sample countries as of the cross section analysis. The rationale will be to pool all the countries at first and observe the existence of any regularity and later to apply panel data analysis to each group of country -namely developed and underdeveloped- by the help of cross section analysis. The purpose of this empirical study is to show robustness of the empirical regularities in the homogeneous type countries. In conclusion, the paper will give brief summaries of theoretical and empirical issues which will be covering the boundaries of discussions and more importantly covering all the main types of empirical studies

The formal/informal employment earnings gap: evidence from Turkey

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

Defining and Measuring Informality in the Turkish Labor Market

This paper investigates how informality can be defined and measured in the Turkish labor market. Two alternative definitions of informality are used to explore their relevance and implications for the Turkish labor market using descriptive statistics. They are the enterprise definition and the social security definition. Further, contributions of individual and job characteristics to the likelihood of informality are investigated using multivariate probit analysis under the two definitions. The social security registration criterion is found to be a better measure of informality in the Turkish labor market given its ability to capture the key relationships between several individual and employment characteristics and the likelihood of informality.The study suggests that preference should be given to social security definition of labor informality for a more accurate depiction of the Turkish labor market. The suitability of the two alternative definitions of informality in the Turkish labor market and its implications have not been investigated before

The formal/informal employment earnings gap: evidence from Turkey

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

Defining and Measuring Informality in the Turkish Labor Market

This paper investigates how informality can be defined and measured in the Turkish labor market. Two alternative definitions of informality are used to explore their relevance and implications for the Turkish labor market using descriptive statistics. They are the enterprise definition and the social security definition. Further, contributions of individual and job characteristics to the likelihood of informality are investigated using multivariate probit analysis under the two definitions. The social security registration criterion is found to be a better measure of informality in the Turkish labor market given its ability to capture the key relationships between several individual and employment characteristics and the likelihood of informality.The study suggests that preference should be given to social security definition of labor informality for a more accurate depiction of the Turkish labor market. The suitability of the two alternative definitions of informality in the Turkish labor market and its implications have not been investigated before

Labor mobility across the formal/informal divide in Turkey: evidence from individual level data

Informality has long been a salient phenomenon in developing country labor markets, thus has been addressed in several theoretical and empirical research. Turkey, given its economic and demographic dynamics, provides rich evidence for a growing, heterogeneous and multifaceted informal labor market. However, the existing evidence on labor informality in Turkey is mixed and scant. Along these lines, we aim to extend the existing literature by providing a diagnosis of dynamic worker flows across distinct labor market states and identifying the effects of certain individual and job characteristics on variant mobility patterns. More specifically, we first develop and discuss a set of probability statistics based on annual worker transitions across distinct employment states utilizing Markov transition processes. As Bosch and Maloney (2007:3) argue: “labor status mobility can be assumed as a process in which changes in the states occur randomly through time, and probabilities of moves between particular states are governed by Markov transition matrices”. Towards this end, we will use the novel Income and Living Conditions Survey (SILC) panel data set to compute the transition probabilities of individuals moving across the labor market states of formal-salaried, informal-salaried, formal self-employed, informal self-employed, unemployed and inactive. The transitions analysis is conducted separately for two, three and four year panels pertaining to 2006 to 2007, 2006 to 2008 and 2006 to 2009 transitions; for total, male and female samples; and lastly for total and non-agricultural samples. In this way, we aim to contribute to the limited body of stylized facts available on mobility and informality in the Turkish labor market. Next, we conduct multinomial logit regressions individually for each set of panel to identify the impact of individual characteristics (i.e. gender, age, education level, work experience, sector of economic activity, firm size, number of other household members, having/not having children, rural/urban) underlying worker transitions. The results reveal several relationships between the covariates and likelihood of variant transitions, and are of remarkable importance for designing policy to adress labor informality and reduce its negative externalities