EXTENDED SUMMARY

Aim

National income is the sum of all income that can be obtained by residents in a given year and the separation of this income between labor and capital is called “functional income distribution”. The “wage share” (the labor force’s share of national income) increases when average wages increase faster than average labor productivity, while this share falls when growth in these wages retards labor productivity growth. The main purpose of this study is to determine the macroeconomic determinants of wage inequality for the period 1988-2020 in Turkey using the ARDL method. While there is an increasing literature on the existence of income inequality in the world, income inequality can negatively affect growth and economic crises in the long run. Another issue is to investigate the possible causes of wage inequality or the gradually decreasing share of wages in the income level. Although wage shares are gradually decreasing in Turkey, it can be said that the subject has not been adequately researched or, in a sense, the determinants of wage inequality have not been revealed in detail.

Method

As stated earlier, the main purpose of this study is to analyze the macroeconomic determinants of wage inequality for Turkey in the period of 1988-2020 by Pesaran et al. (2001) developed by ARDL method. For this purpose, in this study, wage share has been tried to be explained with six different economic variables: investment (investment), inflation rate (inflation), unemployment rate (unemployment), growth (growth), the ratio of foreign trade volume to GDP as an indicator of globalization or openness and the ratio of public expenditures to GDP (govcons) variables are used. Since the dependent variable must be stationary at the first difference [I(1)] and it should be confirmed that no variable is stationary at the second difference [I(2)] in the model, in order for the ARDL method developed by Pesaran and Shin (2001) to be carried out, the relevant variables are included in Phillips-Perron (1988) KPSS (1992) unit root test was applied to the unemployment variable, which exhibits a burst root with a unit root test and gives a positive PP test statistic. The results show that the wage share, which is the dependent variable, is stationary in the first difference [I(1)], while the other variables are stationary [I(0)] at the levels of growth and public expenditure variables, while the remaining variables (openness, unemployment, investment and inflation) are The first difference [I(1)] is stationary. In addition, cointegration was found between macroeconomic variables in the long run.

Findings

The study shows that in the long run, increases in unemployment rate, openness, public consumption or expenditures and inflation rate decrease the share of wages in national income (wage share), while increases in investment and growth rate increase wage share. In a sense, it reveals that reducing wage inequality depends on the increase in investment and growth rates for Turkey. On the other hand, similar to the long-run coefficients, unemployment and openness still have a negative or reducing effect on the wage share in the short run, while inflation, growth and public consumption increase the wage share. Finally, the investment variable, unlike the long run, has a reducing effect on the wage share. Short-term results reveal that unemployment and openness increase wage inequality, but inflation, growth and public consumption reduce wage inequality.

Conclusion

In this study, which investigates the macroeconomic determinants of wage inequality for the 1988-2020 period in Turkey, it is concluded that in the long run, increases in unemployment rate, openness, public expenditures and inflation rates decrease wage shares and increase wage inequality, while increases in investment and growth rates increase this share and reduce wage inequality. has been reached. On the one hand, while these results show that investment and growth policies should be emphasized in order to reduce wage inequality in Turkey, which has shown an outward-looking attitude especially after the 1980s, on the other hand, since they can contribute to the increase of this inequality, labor markets are against the increasing trends in globalization, public consumption and inflation, thus, it demonstrates the need for caution.

Low wages reduce consumption, negatively affect technological innovation and productivity growth, and increase inequality and social spending. It is observed that wage shares have decreased in both developed and developing countries due to the decrease in the bargaining power of the labor force in the world, the globalization of trade and capital, as well as the rapid spread of technology. In terms of future studies, it is important to reveal the effects of globalization, robots, automation and technological developments on wage inequality.