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Citation Information

Type Journal Article - International Review of Applied Economics
Title Exploring different measures of wage flexibility in a developing economy context: The case for Turkey
Volume 27
Issue 3
Publication (Day/Month/Year) 2013
Page numbers 297-315
URL http://gsu-giam.com/images/PDFLER/6552427205.pdf
In this paper we use Turkish household labor force data to address a number of conceptual
issues pertaining to the wage curve, an empirically derived negative relationship between the
real wage level and the local unemployment rate. First, we estimate the wage curve using
various definitions of the unemployment rate including discouraged and marginally attached
workers, or the long-term unemployment rate to explore the most relevant measure of local
labor market tension in the wage setting process. We find that broader definitions of
unemployment provide a more effective reference point in measuring wage flexibility for
women, whose attachment to the labor market is substantially weak in the Turkish context;
while in the case of men, long-term unemployment rate yields the highest elasticity. Second,
we show that particularly in the case of developing economies where labor markets are
segmented by skill level, local unemployment rate disaggregated by education provide more
accurate measures of the degree of group-specific wage competition. Finally, using quantile
regression we show that wage responsiveness to unemployment can not be assumed to be
constant along the wage distribution. In the Turkish case, we find a higher unemployment
elasticity of wages around the median segment of wage distribution.

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