Measuring wage flexibility: the case of Turkey before and after structural adjustment.

Onaran, Ozlem (2002) Measuring wage flexibility: the case of Turkey before and after structural adjustment. Applied Economics, 34 (6). pp. 767-781. ISSN 0003-6846

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Abstract

This article presents an empirical analysis of wage flexibility in the formal private sector in Turkey. The analysis is based on a wage bargaining model that links the nominal wage demands to labour market conditions, which are proxied by the rate of unemployment; productivity improvements; and price expectations. The model is estimated on the basis of panel data of the formal private manufacturing industry; and changes in the wage setting mechanism as the country shifts from an import substituting industrialization strategy to an export-oriented growth regime are discussed. This debate is particularly important in terms of its policy implications, and is relevant to current international discussions of the role of labour markets during structural adjustment. In most economic policy discussions, unemployment is assumed to be a labour market rigidity problem. The results of this article, however, suggest that increased flexibility of wages leaves little room for such arguments. In the light of these findings, the prospect of wage rigidity becomes immaterial, and a focus on the structural problems of the economy, which are outside the labour market, becomes central.

Item Type:Article
Research Areas:Business School > Economics and International Development
Citations on ISI Web of Science:7
ID Code:6000
Deposited On:14 Jun 2010 11:43
Last Modified:11 Oct 2013 05:37

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