This paper assesses the extent to which social assistance programs
in Turkey impact the labor market behavior of those
who receive benefits. Theoretically, the possible channels
through which the receipt of social assistance may disincentivize
work are quite clear, even if the substantial literature
analyzing these dynamics is somewhat inconclusive. The
analysis confirms that even when controlling for the relevant
factors, social assistance beneficiaries are significantly
more likely than non-beneficiaries to be unemployed or
informally employed, and therefore less likely to be formally
employed. Furthermore, among the unemployed, the
probability of moving into informal employment is found
to be significantly larger for beneficiaries than for nonbeneficiaries.
The paper concludes that there are potential
disincentive effects at play in the decision to work, but particularly
in whether to work formally or informally. Finally,
an interesting and perhaps counterintuitive finding is that
beneficiaries who are inactive are less likely to stay inactive
in comparison with non-beneficiaries, which suggests that
social assistance may be playing an activation role rather
than leading to increased dependency. This, coupled with the
previous findings, would indicate that disincentives to work,
based on current design parameters, may not be the primary
concern. Rather, disincentives to formality may be the prevailing
channel through which social assistance affects labor
market outcomes. More attention to designing programs
that are incentive-compatible with formal employment
would be a useful next step for public policy in this area.