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Welfare Impact of the Global Financial Crisis of 2008-2009 on Turkish Households

Year 2013, Volume: 2 Issue: 2, 13 - 52, 01.05.2013

Abstract

This paper looks at how the macro-shock from the 2008 financial crisis has translated into income and welfare shocks in the form of reduced earnings and consumption at the household level in Turkey. Using a specialized household level Welfare Monitoring Survey implemented in May-June 2009 in seven Turkish provinces, the paper first establishes a link between the provincelevel shock and the changes in earnings at the household level. Secondly, using an instrumental-variables strategy, it stablishes the link between the earnings reduction and changes in consumption. The main findings in the paper are that informally employed workers, and those with lower levels of education, were most likely to be hurt by the crisis. In terms of humandevelopment investments at the household level, the paper finds that food expenditures acted as the main adjustment mechanism in the face of the income shock, while education and health expenditures remained relatively stable. The probability of reducing food consumption (and the amount of food provided to children) was highest among the poor that initially had low levels of household assets.

References

  • Bundy, D. A. P. and M. E. Grosh, (2009), “Rethinking School Feeding: Social Safety Nets, Child Development, and the Education Sector,” Directions in Human Development, World Bank.
  • Duryea, S. and D. Lam, (2007), “Effects of Economic Shocks on Children's Employment and Schooling in Brazil,” Journal of Development Economics, pp. 188-214.
  • Escobal, J. J. S., (2005), “Economic Shocks and Changes in School Attendance Levels and Education Expenditure in Peru,” Young Lives: Save the Children UK Working Paper No. 13.
  • Fafchamps, M., C. Udry, and K. Czukas, (1998), “Drought and Saving in West Africa: Are Livestock a Buffer Stock,” Journal of Development Economics, 55, pp. 273-305.
  • Festinger, L., (1957), A Theory of Cognitive Dissonance, Stanford University Press.
  • Filmer, D. and L. H. Pritchett, (2001), “Estimating Wealth Effects without Expenditure Data or Tears: An Application to Educational Enrollments in States of India,” Demography, 38(1), pp. 115-132.
  • Friedman, M., (1957), “A Theory of the Consumption Function,” National Bureau of Economic Research, General Series, No. 63, Princeton University Press.
  • Holzmann, R., Y. Pouget, M. Vodopivec and M. Weber, (2011), Severance Pay Programs Around the World: History, Rationale, Status, and Reforms.
  • McKenzie, D. J., (2003), “How do Households Cope With Aggregate Shocks? Evidence from the Mexican Peso Crisis,” World Development, 31(7), pp. 1179-1199.
  • Ministry of Finance, Turkey, Central Government Budget Realizations, www.bumko.gov.tr

Welfare Impact of the Global Financial Crisis of 2008-2009 on Turkish Households

Year 2013, Volume: 2 Issue: 2, 13 - 52, 01.05.2013

Abstract

This paper looks at how the macro-shock from the 2008 financial crisis has translated into income and welfare shocks in the form of reduced earnings and consumption at the household level in Turkey. Using a specialized household level Welfare Monitoring Survey implemented in May-June 2009 in seven Turkish provinces, the paper first establishes a link between the provincelevel shock and the changes in earnings at the household level. Secondly, using an instrumental-variables strategy, it stablishes the link between the earnings reduction and changes in consumption. The main findings in the paper are that informally employed workers, and those with lower levels of education, were most likely to be hurt by the crisis. In terms of humandevelopment investments at the household level, the paper finds that food expenditures acted as the main adjustment mechanism in the face of the income shock, while education and health expenditures remained relatively stable. The probability of reducing food consumption (and the amount of food provided to children) was highest among the poor that initially had low levels of household assets.

References

  • Bundy, D. A. P. and M. E. Grosh, (2009), “Rethinking School Feeding: Social Safety Nets, Child Development, and the Education Sector,” Directions in Human Development, World Bank.
  • Duryea, S. and D. Lam, (2007), “Effects of Economic Shocks on Children's Employment and Schooling in Brazil,” Journal of Development Economics, pp. 188-214.
  • Escobal, J. J. S., (2005), “Economic Shocks and Changes in School Attendance Levels and Education Expenditure in Peru,” Young Lives: Save the Children UK Working Paper No. 13.
  • Fafchamps, M., C. Udry, and K. Czukas, (1998), “Drought and Saving in West Africa: Are Livestock a Buffer Stock,” Journal of Development Economics, 55, pp. 273-305.
  • Festinger, L., (1957), A Theory of Cognitive Dissonance, Stanford University Press.
  • Filmer, D. and L. H. Pritchett, (2001), “Estimating Wealth Effects without Expenditure Data or Tears: An Application to Educational Enrollments in States of India,” Demography, 38(1), pp. 115-132.
  • Friedman, M., (1957), “A Theory of the Consumption Function,” National Bureau of Economic Research, General Series, No. 63, Princeton University Press.
  • Holzmann, R., Y. Pouget, M. Vodopivec and M. Weber, (2011), Severance Pay Programs Around the World: History, Rationale, Status, and Reforms.
  • McKenzie, D. J., (2003), “How do Households Cope With Aggregate Shocks? Evidence from the Mexican Peso Crisis,” World Development, 31(7), pp. 1179-1199.
  • Ministry of Finance, Turkey, Central Government Budget Realizations, www.bumko.gov.tr
There are 10 citations in total.

Details

Primary Language English
Subjects Economics
Journal Section Research Articles
Authors

Meltem A. Aran This is me

Publication Date May 1, 2013
Published in Issue Year 2013 Volume: 2 Issue: 2

Cite

APA Aran, M. A. (2013). Welfare Impact of the Global Financial Crisis of 2008-2009 on Turkish Households. Ekonomi-Tek, 2(2), 13-52.