Research Article

The Evolution of Wage Inequality in Türkiye: Firm-Level Decomposition by Size, Sector, and Distribution

Volume: 10 Number: 1 March 16, 2026
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The Evolution of Wage Inequality in Türkiye: Firm-Level Decomposition by Size, Sector, and Distribution

Abstract

Using matched employer–employee data from Türkiye’s Entrepreneurship Information System (EIS) covering 2006–2022, this study documents a broad and sustained decline in wage inequality between 2006 and 2017, driven mainly by shrinking between-firm dispersion among large enterprises, followed by a mild reversal thereafter. Variance decompositions by firm size and sector show that compression was concentrated among firms with 250 or more employees, where inter-firm pay gaps narrowed sharply—particularly in manufacturing, which alone accounts for nearly 70 percent of the total reduction in wage variance. While the 2016 minimum-wage hike temporarily accelerated compression, its effects proved short-lived; the long-term trend reflects structural convergence among firms rather than transitory policy shocks. Distributional evidence shows that the upper-tail gap (P90–P50) narrowed markedly, whereas the lower-tail gap (P50–P10) widened modestly, reflecting stronger wage growth among median earners. Kernel density estimates further reveal a structural reallocation of employment from both tails of the wage distribution toward the upper-middle range—particularly within large firms, where the share of top earners contracted sharply, reinforcing the observed pattern of middle-wage expansion. Collectively, the findings indicate a structural equalization of Türkiye’s wage distribution with recent years showing tentative signs of divergence. Future research should disentangle the roles of productivity, wage-setting, and worker–firm sorting in shaping these evolving patterns.

Keywords

References

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Details

Primary Language

English

Subjects

Labor Economics

Journal Section

Research Article

Publication Date

March 16, 2026

Submission Date

October 21, 2025

Acceptance Date

December 11, 2025

Published in Issue

Year 2026 Volume: 10 Number: 1

APA
Çelik, P. (2026). The Evolution of Wage Inequality in Türkiye: Firm-Level Decomposition by Size, Sector, and Distribution. Fiscaoeconomia, 10(1), 1-27. https://doi.org/10.25295/fsecon.1807787
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