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Year 2023, Volume: 21 Issue: 3, 364 - 392, 14.10.2023

Yusuf Kenan Bağır , Müşerref Küçükbayrak , Huzeyfe Torun

https://doi.org/10.11611/yead.1345943
Cited By: 1

Abstract

References

  • Akçiğit, U., Akgündüz, Y. E., Cilasun, S. M., Ozcan-Tok, E. and Yılmaz, F. (y.y) ‘‘Facts on Business Dynamism in Turkey’’, European Economic Review, 128: 1-30.
  • Alberola, E., and Urrutia, C. (2019) ‘‘Does Informality Facilitate Inflation Stability?’’, Bank for International Studies Working Papers 778.
  • Angel-Urdinola, D., F. and Tanabe, K. (2012) ‘‘Micro-Determinants of Informal Employment in the Middle East and North Africa Region’’, SP Discussion Paper; No. 1201. World Bank, Washington, DC.
  • Aydın, E., Hisarcıklılar, M. and İlkkaracan, I. (2010) ‘‘Formal Versus Informal Labor Market Segmentation in Turkey in the Course of Market Liberalization’’, Topics in Middle Eastern and North African Economies, 12.
  • Başlevent, C., and Acar, A. (2015) ‘‘Recent Trends in Informal Employment in Turkey’’, Yildiz Social Science Review, 1(1): 77-88.
  • Chacaltana, J. (2016) ‘‘Peru, 2002-2012: Growth, Structural Change and Formalization’’, Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL): 45-64.
  • European Commission (2013) ‘‘Employment and Social Developments in Europe 2013’’, European Commission, Brussels.
  • Fairlie, R. W. (2005) ‘‘An Extension of the Blinder-Oaxaca Decomposition Technique to Logit and Probit Models’’, Journal of Economic and Social Measurement. 30: 305-316.
  • Fairris, D. and Jonasson, E. (2016) ‘‘Determinants of Changing Informal Employment in Brazil, 2000-2010’’, Munich Personal RePEC Archive, Paper No. 71475.
  • Fields, G.S., (1975) ‘‘Rural–Urban Migration, Urban Unemployment and Underemployment, and Job-search Activity in LDCs’’, Journal of Development Economics. 2 (2): 165-187.
  • Fiess, N., Fugazza, M., and Maloney, W. (2010) ‘‘Informal Self-employment and Macroeconomic Fluctuations’’, Journal of Development Economics, (91): 211-226.
  • Gindling, T., (1991) ‘‘Labor Market Segmentation and the Determination of Wages in the Public, Private-Formal and Informal Sectors in San-Jose, Costa-Rica’’, Economic Development and Cultural Change 39(3): 585-603.
  • Günther, I., and Launov, A. (2012) ‘‘Informal Employment in Developing Countries: Opportunity or Last Resort?’’, Journal of Development Economics, 97: 88-98.
  • Harris, J.R. and Todaro, M.P. (1970) ‘‘Migration, Unemployment and Development: A Two Sector Analysis’’, The American Economic Review, 60 (1): 126-142.
  • Hatunoğlu, E. E. (2011) ‘‘Developments in Agricultural Sector Employment in Turkey’’, Background paper to the report “Managing Labor Markets through the Cycle”, World Bank and Ministry of Development of Turkey.
  • Hurst, E., Li, G., and Pugsley, B. (2014) ‘‘Are Household Surveys Like Tax Forms? Evidence from Income Underreporting of the Self-Employed’’, Review of Economics and Statistics, 96(1): 19-33.
  • ILO (2018) ‘‘Women and Men in the Informal Economy: A Statistical Picture’’, ILO, Geneva.
  • ILO (2019) ‘‘Time to Act for SDG 8: Integrating Decent Work, Sustained Growth and Environmental Integrity’’, International Labour Office, Geneva.
  • Kanbur, R. (2017) ‘‘Informality: Causes, Consequences and Policy Responses’’, Review of Development Economics, 21: 939-961.
  • Kriz, K. A., J. Merikull, A. Paulus, and K. Staehr (2007) ‘‘Why do Individuals Evade Payroll and Income Taxation in Estonia?’’, U of Tartu Economics and Business Administration Working Paper (49-2007).
  • Lehmann, H. and Zaiceva, A. (2015) ‘‘Redefining Informality and Measuring its Determinants: Evidence From The Russian Labour Market’’, Journal of International Development, 27: 464-488.
  • Lewis, W. A. (1954) ‘‘Economic Development with Unlimited Supplies of Labour Manchester School’’, 22 (2): 139-191.
  • Leyva, G., and Urrutia, C. (2018) ‘‘Informality, Labor Regulation, and the Business Cycle’’, Working Papers 2018-19, Banco de México.
  • Loayza, N. V. and Rigolini, J. (2011) ‘‘Informal Employment: Safety Net or Growth Engine?’’, World Development. 39(9): 1503-1515.
  • Magnac, T., (1991) ‘‘Segmented or Competitive Labor Markets’’, Econometrica 59 (1): 165-187.
  • Maloney, W.F., (1999) ‘‘Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico’’, World Bank Economic Review 13(2): 275-302.
  • Maloney, W.F., (2004) ‘‘Informality Revisited’’, World Development 32 (7): 1159–1178.
  • Moore, J.C., Stinson L.L., and Welniak, E.J., Jr. (2000) ‘‘Income Measurement Error in Surveys: A Review’’, Journal of Official Statistics, 16(4): 331-361.
  • Narayanan, A. (2015) ‘‘Informal Employment in India: Voluntary Choice or A Result of Labor Market Segmentation?’’, Indian Journal of Labour Economics 58(1): 119-167.
  • OECD (2019) ‘‘Pensions at a Glance 2019: OECD and G20 Indicators’’, OECD Publishing, Paris. OECD (2020) ‘‘Taxing Wages 2020’’, OECD Publishing, Paris.
  • Pelek, S., and Uysal, G. (2016) ‘‘Envelope Wages, Underreporting and Tax Evasion: The Case of Turkey’’, Paper Presented at the 17th Louis-Andre-Gerard-Varet International Conference in Public Economics, June 25-26, Aix-en-Provence, France.
  • Perry, G. E., Maloney, W. F., Arias, O. S., Fajnzylber. P., Mason, A. D. and Saavedra-Chanduvi, J. (2007) ‘‘Informality: Exit and Exclusion’’, World Bank: Washington DC.
  • Radchenko, N. (2017) ‘‘Informal Employment in Developing Economies: Multiple Heterogeneity’’, The Journal of Development Studies. 53(4): 495-513.
  • Reis, J. G., Angel-Urdinola, D., and Quijada, C. (2009) ‘‘Informality in Turkey: Size, Trends, Determinants and Consequences’’, Background Paper for the World Bank Country Economic Memorandum-Informality: Causes, Consequences, Polices.
  • Salem, M. B., Bensidoun, I. and Pelek, S. (2011) ‘‘Informal Employment in Turkey: An Overview’’, Région et Développement, (34): 57-84.
  • Tansel, A. and Kan, E. Ö. (2017) ‘‘Labor Mobility across the Formal/Informal Divide in Turkey: Evidence from Individual Level Data’’, Journal of Economic Studies, 44(4): 617-635.
  • Tansel, A. (2000) “Formal and Informal Sector Choice of Wage Earners and Their Wages in Turkey,” in Informal Sector I, ed. By Tuncer Bulutay, State Institute of Statistics, 2000, Ankara, 125-150. Also in Economic Growth Center Discussion Paper No. 797, Yale University.
  • Tansel, A. (2001) “Wage-Earners Self-Employment and Gender in the Informal Sector in Turkey,” ERF (Economic Research Forum) Working Paper No. 0102, Cairo, Egypt. Also, Background Paper for Engendering Development, World Bank, Washington, D.C.
  • Todaro, M. P. (1969) ‘‘A Model of Labor Migration and Urban Unemployment in Less Developed Countries’’, The American Economic Review. 59(1): 138-148.
  • Tonin, M. (2011) ‘‘Minimum Wage and Tax Evasion: Theory and Evidence’’, Journal of Public Economics, 95(11-12): 1635-1651.
  • Tonin, M. (2013) ‘‘Underreporting of Earnings and the Minimum Wage Spike’’, IZA Journal of European Labor Studies, 2(1): 2.
  • Wahba, J., and Assaad, R. (2017) ‘‘Flexible Labor Regulations and Informality in Egypt’’, Review of Development Economics, 21(4): 962-984.
  • Williams, C. C. and Bezeredi, S. (2017) ‘‘Tackling the Illegal Practice of Under-Reporting Employees' Wages: Lessons from the Republic of Macedonia’’, UTMS Journal of Economics, 8(3): 243-258.
  • Williams, C. C. and Horodnic, I. A. (2017) ‘‘Evaluating the Illegal Employer Practice of Under-Reporting Employees’ Salaries’’, British Journal of Industrial Relations, 55(1): 83-111.
  • Williams, C. C. and Padmore, J. (2013) “Envelope Wages” in the European Union’’, International Labour Review, 152 (3–4): 412-430.
  • World Bank (2010) ‘‘Turkey Country Economic Memorandum: Informality: Causes, Consequences, Policies’’, World Bank.
  • Yun, M. S. (2000) ‘‘Decomposition Analysis for a Binary Choice Model. IZA Discussion Paper Series’’, No.145.
  • Yun, M. S. (2004) ‘‘Decomposing Differences in the First Moment’’, Economic Letters. 82: 275-280.
  • Yun, M. S. (2005) ‘‘Normalized Equation and Decomposition Analysis: Computation and Inference’’, IZA Discussion Paper Series, 1822.

Declining Labor Market Informality in Turkey: Unregistered Employment and Wage Underreporting

Year 2023, Volume: 21 Issue: 3, 364 - 392, 14.10.2023

Yusuf Kenan Bağır , Müşerref Küçükbayrak , Huzeyfe Torun

https://doi.org/10.11611/yead.1345943
Cited By: 1

Abstract

This paper examines the labor market informality in Turkey at two margins, unregistered employment and wage underreporting. We first document the stylized facts about the informal employment and its change over the 15 years from 2004 to 2018. While doing this, we examine the heterogeneity in the informality across regions, sectors, firm properties and worker characteristics. Second, we decompose the change in the informality rate into its components using the Oaxaca-Blinder methodology. We find that the workforce composition change in gender, age, education, occupation, and industries explains half of the decline in the informality rate from 2004 to 2018. Finally, we analyze the wage underreporting behavior in the Turkish labor market using both survey data and social security registry. We show that there has been a wide gap between the wages earned and the wages declared to the Social Security Institution among registered employees. However, this discrepancy declines significantly in recent years.

Keywords

Informal Employment Wage Underreporting Turkey.

References

  • Akçiğit, U., Akgündüz, Y. E., Cilasun, S. M., Ozcan-Tok, E. and Yılmaz, F. (y.y) ‘‘Facts on Business Dynamism in Turkey’’, European Economic Review, 128: 1-30.
  • Alberola, E., and Urrutia, C. (2019) ‘‘Does Informality Facilitate Inflation Stability?’’, Bank for International Studies Working Papers 778.
  • Angel-Urdinola, D., F. and Tanabe, K. (2012) ‘‘Micro-Determinants of Informal Employment in the Middle East and North Africa Region’’, SP Discussion Paper; No. 1201. World Bank, Washington, DC.
  • Aydın, E., Hisarcıklılar, M. and İlkkaracan, I. (2010) ‘‘Formal Versus Informal Labor Market Segmentation in Turkey in the Course of Market Liberalization’’, Topics in Middle Eastern and North African Economies, 12.
  • Başlevent, C., and Acar, A. (2015) ‘‘Recent Trends in Informal Employment in Turkey’’, Yildiz Social Science Review, 1(1): 77-88.
  • Chacaltana, J. (2016) ‘‘Peru, 2002-2012: Growth, Structural Change and Formalization’’, Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL): 45-64.
  • European Commission (2013) ‘‘Employment and Social Developments in Europe 2013’’, European Commission, Brussels.
  • Fairlie, R. W. (2005) ‘‘An Extension of the Blinder-Oaxaca Decomposition Technique to Logit and Probit Models’’, Journal of Economic and Social Measurement. 30: 305-316.
  • Fairris, D. and Jonasson, E. (2016) ‘‘Determinants of Changing Informal Employment in Brazil, 2000-2010’’, Munich Personal RePEC Archive, Paper No. 71475.
  • Fields, G.S., (1975) ‘‘Rural–Urban Migration, Urban Unemployment and Underemployment, and Job-search Activity in LDCs’’, Journal of Development Economics. 2 (2): 165-187.
  • Fiess, N., Fugazza, M., and Maloney, W. (2010) ‘‘Informal Self-employment and Macroeconomic Fluctuations’’, Journal of Development Economics, (91): 211-226.
  • Gindling, T., (1991) ‘‘Labor Market Segmentation and the Determination of Wages in the Public, Private-Formal and Informal Sectors in San-Jose, Costa-Rica’’, Economic Development and Cultural Change 39(3): 585-603.
  • Günther, I., and Launov, A. (2012) ‘‘Informal Employment in Developing Countries: Opportunity or Last Resort?’’, Journal of Development Economics, 97: 88-98.
  • Harris, J.R. and Todaro, M.P. (1970) ‘‘Migration, Unemployment and Development: A Two Sector Analysis’’, The American Economic Review, 60 (1): 126-142.
  • Hatunoğlu, E. E. (2011) ‘‘Developments in Agricultural Sector Employment in Turkey’’, Background paper to the report “Managing Labor Markets through the Cycle”, World Bank and Ministry of Development of Turkey.
  • Hurst, E., Li, G., and Pugsley, B. (2014) ‘‘Are Household Surveys Like Tax Forms? Evidence from Income Underreporting of the Self-Employed’’, Review of Economics and Statistics, 96(1): 19-33.
  • ILO (2018) ‘‘Women and Men in the Informal Economy: A Statistical Picture’’, ILO, Geneva.
  • ILO (2019) ‘‘Time to Act for SDG 8: Integrating Decent Work, Sustained Growth and Environmental Integrity’’, International Labour Office, Geneva.
  • Kanbur, R. (2017) ‘‘Informality: Causes, Consequences and Policy Responses’’, Review of Development Economics, 21: 939-961.
  • Kriz, K. A., J. Merikull, A. Paulus, and K. Staehr (2007) ‘‘Why do Individuals Evade Payroll and Income Taxation in Estonia?’’, U of Tartu Economics and Business Administration Working Paper (49-2007).
  • Lehmann, H. and Zaiceva, A. (2015) ‘‘Redefining Informality and Measuring its Determinants: Evidence From The Russian Labour Market’’, Journal of International Development, 27: 464-488.
  • Lewis, W. A. (1954) ‘‘Economic Development with Unlimited Supplies of Labour Manchester School’’, 22 (2): 139-191.
  • Leyva, G., and Urrutia, C. (2018) ‘‘Informality, Labor Regulation, and the Business Cycle’’, Working Papers 2018-19, Banco de México.
  • Loayza, N. V. and Rigolini, J. (2011) ‘‘Informal Employment: Safety Net or Growth Engine?’’, World Development. 39(9): 1503-1515.
  • Magnac, T., (1991) ‘‘Segmented or Competitive Labor Markets’’, Econometrica 59 (1): 165-187.
  • Maloney, W.F., (1999) ‘‘Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico’’, World Bank Economic Review 13(2): 275-302.
  • Maloney, W.F., (2004) ‘‘Informality Revisited’’, World Development 32 (7): 1159–1178.
  • Moore, J.C., Stinson L.L., and Welniak, E.J., Jr. (2000) ‘‘Income Measurement Error in Surveys: A Review’’, Journal of Official Statistics, 16(4): 331-361.
  • Narayanan, A. (2015) ‘‘Informal Employment in India: Voluntary Choice or A Result of Labor Market Segmentation?’’, Indian Journal of Labour Economics 58(1): 119-167.
  • OECD (2019) ‘‘Pensions at a Glance 2019: OECD and G20 Indicators’’, OECD Publishing, Paris. OECD (2020) ‘‘Taxing Wages 2020’’, OECD Publishing, Paris.
  • Pelek, S., and Uysal, G. (2016) ‘‘Envelope Wages, Underreporting and Tax Evasion: The Case of Turkey’’, Paper Presented at the 17th Louis-Andre-Gerard-Varet International Conference in Public Economics, June 25-26, Aix-en-Provence, France.
  • Perry, G. E., Maloney, W. F., Arias, O. S., Fajnzylber. P., Mason, A. D. and Saavedra-Chanduvi, J. (2007) ‘‘Informality: Exit and Exclusion’’, World Bank: Washington DC.
  • Radchenko, N. (2017) ‘‘Informal Employment in Developing Economies: Multiple Heterogeneity’’, The Journal of Development Studies. 53(4): 495-513.
  • Reis, J. G., Angel-Urdinola, D., and Quijada, C. (2009) ‘‘Informality in Turkey: Size, Trends, Determinants and Consequences’’, Background Paper for the World Bank Country Economic Memorandum-Informality: Causes, Consequences, Polices.
  • Salem, M. B., Bensidoun, I. and Pelek, S. (2011) ‘‘Informal Employment in Turkey: An Overview’’, Région et Développement, (34): 57-84.
  • Tansel, A. and Kan, E. Ö. (2017) ‘‘Labor Mobility across the Formal/Informal Divide in Turkey: Evidence from Individual Level Data’’, Journal of Economic Studies, 44(4): 617-635.
  • Tansel, A. (2000) “Formal and Informal Sector Choice of Wage Earners and Their Wages in Turkey,” in Informal Sector I, ed. By Tuncer Bulutay, State Institute of Statistics, 2000, Ankara, 125-150. Also in Economic Growth Center Discussion Paper No. 797, Yale University.
  • Tansel, A. (2001) “Wage-Earners Self-Employment and Gender in the Informal Sector in Turkey,” ERF (Economic Research Forum) Working Paper No. 0102, Cairo, Egypt. Also, Background Paper for Engendering Development, World Bank, Washington, D.C.
  • Todaro, M. P. (1969) ‘‘A Model of Labor Migration and Urban Unemployment in Less Developed Countries’’, The American Economic Review. 59(1): 138-148.
  • Tonin, M. (2011) ‘‘Minimum Wage and Tax Evasion: Theory and Evidence’’, Journal of Public Economics, 95(11-12): 1635-1651.
  • Tonin, M. (2013) ‘‘Underreporting of Earnings and the Minimum Wage Spike’’, IZA Journal of European Labor Studies, 2(1): 2.
  • Wahba, J., and Assaad, R. (2017) ‘‘Flexible Labor Regulations and Informality in Egypt’’, Review of Development Economics, 21(4): 962-984.
  • Williams, C. C. and Bezeredi, S. (2017) ‘‘Tackling the Illegal Practice of Under-Reporting Employees' Wages: Lessons from the Republic of Macedonia’’, UTMS Journal of Economics, 8(3): 243-258.
  • Williams, C. C. and Horodnic, I. A. (2017) ‘‘Evaluating the Illegal Employer Practice of Under-Reporting Employees’ Salaries’’, British Journal of Industrial Relations, 55(1): 83-111.
  • Williams, C. C. and Padmore, J. (2013) “Envelope Wages” in the European Union’’, International Labour Review, 152 (3–4): 412-430.
  • World Bank (2010) ‘‘Turkey Country Economic Memorandum: Informality: Causes, Consequences, Policies’’, World Bank.
  • Yun, M. S. (2000) ‘‘Decomposition Analysis for a Binary Choice Model. IZA Discussion Paper Series’’, No.145.
  • Yun, M. S. (2004) ‘‘Decomposing Differences in the First Moment’’, Economic Letters. 82: 275-280.
  • Yun, M. S. (2005) ‘‘Normalized Equation and Decomposition Analysis: Computation and Inference’’, IZA Discussion Paper Series, 1822.
There are 49 citations in total.

Details

Primary Language English
Subjects Family and Household Studies, Finance and Investment (Other)
Journal Section Articles
Authors

Yusuf Kenan Bağır 0000-0002-9504-529X

Müşerref Küçükbayrak 0000-0002-3462-9996

Huzeyfe Torun 0000-0002-3209-9047

Early Pub Date October 17, 2023
Publication Date October 14, 2023
Published in Issue Year 2023 Volume: 21 Issue: 3

Cite

APA Bağır, Y. K., Küçükbayrak, M., & Torun, H. (2023). Declining Labor Market Informality in Turkey: Unregistered Employment and Wage Underreporting. Yönetim Ve Ekonomi Araştırmaları Dergisi, 21(3), 364-392. https://doi.org/10.11611/yead.1345943
AMA Bağır YK, Küçükbayrak M, Torun H. Declining Labor Market Informality in Turkey: Unregistered Employment and Wage Underreporting. Yönetim ve Ekonomi Araştırmaları Dergisi. October 2023;21(3):364-392. doi:10.11611/yead.1345943
Chicago Bağır, Yusuf Kenan, Müşerref Küçükbayrak, and Huzeyfe Torun. “Declining Labor Market Informality in Turkey: Unregistered Employment and Wage Underreporting”. Yönetim Ve Ekonomi Araştırmaları Dergisi 21, no. 3 (October 2023): 364-92. https://doi.org/10.11611/yead.1345943.
EndNote Bağır YK, Küçükbayrak M, Torun H (October 1, 2023) Declining Labor Market Informality in Turkey: Unregistered Employment and Wage Underreporting. Yönetim ve Ekonomi Araştırmaları Dergisi 21 3 364–392.
IEEE Y. K. Bağır, M. Küçükbayrak, and H. Torun, “Declining Labor Market Informality in Turkey: Unregistered Employment and Wage Underreporting”, Yönetim ve Ekonomi Araştırmaları Dergisi, vol. 21, no. 3, pp. 364–392, 2023, doi: 10.11611/yead.1345943.
ISNAD Bağır, Yusuf Kenan et al. “Declining Labor Market Informality in Turkey: Unregistered Employment and Wage Underreporting”. Yönetim ve Ekonomi Araştırmaları Dergisi 21/3 (October 2023), 364-392. https://doi.org/10.11611/yead.1345943.
JAMA Bağır YK, Küçükbayrak M, Torun H. Declining Labor Market Informality in Turkey: Unregistered Employment and Wage Underreporting. Yönetim ve Ekonomi Araştırmaları Dergisi. 2023;21:364–392.
MLA Bağır, Yusuf Kenan et al. “Declining Labor Market Informality in Turkey: Unregistered Employment and Wage Underreporting”. Yönetim Ve Ekonomi Araştırmaları Dergisi, vol. 21, no. 3, 2023, pp. 364-92, doi:10.11611/yead.1345943.
Vancouver Bağır YK, Küçükbayrak M, Torun H. Declining Labor Market Informality in Turkey: Unregistered Employment and Wage Underreporting. Yönetim ve Ekonomi Araştırmaları Dergisi. 2023;21(3):364-92.

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