“The Effect of Education on Internal Migration: Level and Timing Effects by Reason of Migration” with A. Aydemir and M. Kırdar. Labour Economics. 74 (2022).
We take advantage of a major compulsory schooling reform in Turkey to provide novel evidence on the causal effect of education on both the incidence and timing of internal migration. In addition, we provide causal effects of education on different types of migration. We find that education substantially increases the incidence of ever-migrating by the mid-20 s for men but not for women. However, using a dataset that comprises complete migration histories, including the reason for each migration, we show that women become more likely to migrate at earlier ages, and their migration reasons change. Women become more likely to move for human capital investments and employment purposes and less likely to be tied-movers.
“Two and a Half Million Syrian Refugees, Tasks and Capital Intensity” with Y. E. Akgündüz. Journal of Development Economics. 145 (2020).
We investigate how the rapid increase in the low-skilled labor supply induced by the inflow of 2.5 million Syrian refugees changed the tasks performed by native workers and the amount of capital used by firms in Turkey. Despite the unexpected nature of the refugee inflow, location choice of the refugees may be endogenous to the labor market opportunities of hosting regions. To handle this endogeneity issue, we use an instrument for the refugee intensity based on the distance of Turkish regions to the Syrian ones. The results based on Labor Force Survey suggest that the inflow of refugees increased natives’ task complexity, reducing the intensity of manual tasks, and raising the intensity of abstract, routine and ICT tasks. This effect is particularly strong for natives with medium level of education. Exploiting the administrative firm data that contains the entirety of firms in the country, we find that the firms reduced their fixed assets. The fixed asset reduction is largest in machinery and equipment, which can be interpreted as a decline in the capital intensity of production. We conclude that tasks provided by Syrian refugees are substitutes for natives’ manual tasks and firms’ capital, and complementary to natives’ more complex tasks.
"Heterogeneous Effect of Exchange Rates on Firms’ Exports: Role of Labor Intensity" with K. Akdoğan and Y.K. Bağır (2021). (Under Review, available as TCMB WP 2115)
Using an extensive firm-level database that combines balance sheet information, social security registry and customs data, we examine whether the relationship between the exchange rate and exports change with the degree of labor-intensity of production. The results based on manufacturing firms in Turkey suggest that the sensitivity of labor-intensive firms to the exchange rate is higher than that of the less labor-intensive ones, both at the intensive and extensive margins of exports. However, we do not find a significant impact on the export prices varying across the labor-intensity of the firms. Our results are robust to alternative definitions of labor-intensity and exchange rates, and the use of different time spans.
"Declining Labor Market Informality in Turkey: Unregistered Employment and Wage Underreporting" with Y. K. Bağır and M. Küçükbayrak (2021). (Under Review, available as TCMB WP 2119)
This paper examines the trends in 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 past 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 Turkish labor market using both survey data and social security registry. We show that there has been a gap between the wages earned and the wages declared to Social Security Institution among registered employees. However, this discrepancy has declined significantly in recent years.
"Unleashing the full potential of the Turkish business sector." with Dennis Dlugosch, Rauf Gönenç, Yusuf Kenan Bağır and Eun Jung Kim. OECD Economics Department Working Papers, No. 1665 (2021).
Productivity in Turkey has been growing stronger than in most peer countries since 2010 but has slowed down. Despite a remarkably entrepreneurial population, business dynamism has also been less vigorous in recent years. This working paper discusses the factors behind this slowdown and analyses a wide range of structural policies that would help to revive productivity growth and unleash the full potential of the Turkish business sector. The elevated number of informal, semi-formal and fully formal forms constitutes a key impediment to higher growth and more high-quality jobs. Structural reforms that allow more flexibility in labour markets, more competition in product markets and major progress with the quality of governance would foster productivity growth, job creation but also boost the digital transformation. Streamlining and simplifying the complex system of regulations and government support schemes would prevent firms from clustering around eligibility thresholds and thus remove obstacles to the upscaling of firms.
“Impact of Minimum Wages on Exporters: Evidence From a Sharp Increase in Turkey” with Y. E. Akgündüz, A. Aldan, Y. K. Bağır, (2019). (Revise & Resubmit, available as TCMB WP 1920)
The minimum wages in Turkey rose by nearly 30% in January 2016. We investigate the impact of the increase in minimum wages on export value and prices of firms. We use administrative employee-employer matched firm and transaction level customs data for the analysis. We calculate the potential exposure of each firm to the minimum wage increase according to their 2015 employment records and estimate the effects using a difference-in-differences approach. The results show that there is no significant effect on export prices suggesting that Turkish exporters are price-takers in international trade and producer costs have little effect on export prices in the short run. The impact on export amount is varying across firms depending on the firm size.
"Ex-Ante Labor Market Effects of Compulsory Military Service". Journal of Comparative Economics. 47:1 (2019).
Previous research on military conscription exclusively focuses on the effect of military service on subsequent labor market outcomes. I examine the effect of peacetime conscription on early labor market outcomes of potential conscripts before they are called up for service. In a simple theoretical framework with costly job search and no job security, I show that an expected interruption in civilian life reduces the incentive of teenagers to search for a job. Moreover, when firms bear the cost of on-the-job training, an expected interruption may reduce employers’ likelihood of offering a job to expected future conscripts. Using micro-data from Turkey, Argentina, Peru and Spain, I present evidence that the anticipation of compulsory conscription reduces the labor force participation of teenage men by 6.7 percent compared to men in their twenties, and employment by 11 percent, while raising unemployment in this group by 9 percent. Interestingly, I find mirroring effects on teenage women. There is a 7.5 percent decrease in the labor force participation and a 10-13 percent decrease in employment after the abolition of conscription, suggesting a high degree of substitutability between men and women.
"Do Vocational High School Graduates Have Better Employment Outcomes than General High School Graduates?" with S. Tümen (2019). International Journal of Manpower. 40:8 (2019).
This paper estimates the causal effect of vocational high school (VHS) education on employment likelihood relative to general high school (GHS) education in Turkey using census data. To address non-random selection into high school types, we collect construction dates of the VHSs at the town-level and use VHS availability in the town by age 13 as an instrumental variable. The first-stage estimates suggest that the availability of VHS does not affect the overall high school graduation rates, but generates a substitution from GHS to VHS. The OLS estimates yield the result that the individuals with a VHS degree are around 5 percentage points more likely to be employed compared to those with a GHS degree. When we use the availability of VHS as an instrumental variable, we still find positive and statistically significant effect of VHS degree on employment likelihood relative to GHS degree. However, once we include town-specific socio-economic variables to control for education, employment, and business activity levels in the town, the IV estimates get much smaller and become statistically insignificant. We conclude that although the VHS construction generates a substitution from GHS to VHS education, this substitution is not transformed into increased employment rates in a statistically significant way. We also argue that location-specific controls improve the reliability of the school construction/proximity instruments.
“Job Mobility in Turkey” with Y. E. Akgündüz, A. Aldan, Y. K. Bağır. Central Bank Review. 19:3 (2019)
The degree and quality of job mobility is an important factor of optimal allocation of resources and growth in an economy. Job mobility facilitates productive employer-employee matches. In that respect, job mobility allows employees to work in industries which suit their skills and enables earning gains. It also supports industry level productivity gains by providing shift of employment from less productive firms to more productive ones. In this study, a descriptive analysis of job mobility is conducted using Entrepreneurship Information System data. The results suggest that job mobility is higher among young and men. In addition, more than half of the job movers switch to jobs in bigger, more productive and more profitable firms. Job mobility is intensive within manufacturing and trade-transportation industries and employees in mining, construction, public administration, education and health industries are more likely to switch to jobs in other industries. Finally, the determinants of job mobility between regions are analyzed and a positive relation between internal migration and intra-regional job mobility is found.
"Do Subsidized Export Loans Increase Exports?" with Y.E. Akgunduz and S.H. Kal. The World Economy. 41:8 (2018).
Abstract
Turkey's export rediscount credit programme provides credit to exporting firms that is both easy to acquire and is offered at a low interest rate. We follow the performance of firms that first received the credit in 2012 when the amount of credit provided went up dramatically in 2012. We use propensity score mathing to construct a control group of firms with which we compare the credit-receiving firms before and after 2012 in a difference-in-differences framework. These firms have increased their exports substantially in the following years compared to the matched firms with similar propensities to receive the rediscount credit. We find that firms that received the rediscount credit increased their exports by 65% and total sales by 19% compared to matched firms. We find no statistically significant effects on domestic sales and profits. We also find suggestive evidence that the effects fade away after a certain amount of credits.
"Compulsory Schooling and Early Labor Market Outcomes" Journal of Labor Research. 39:3 (2018).
Abstract
The 1997 reform in Turkey which extended compulsory schooling from 5 to 8 years provides an opportunity to estimate the returns to schooling in a middle-income country. The availability of a rich set of labor market and educational variables also provides an opportunity to assess mechanisms through which returns to schooling occur. I find quite small effects of compulsory schooling on earnings of men but large positive effects on earnings of women who work, without raising the overall low rate of labor force participation. In terms of mechanisms, I find that women who worked moved into higher skill and formal sector jobs and carried out more complicated tasks on average. I propose that differential marginal costs of schooling explain the low average schooling level among women before the reform and the very different outcomes of the reform for men and women.
"The Impact of Syrian Refugees on Natives' Labor Market Outcomes in Turkey: Evidence from a Quasi-Experimental Design" with Hatice B. Gürcihan Yüncüler, Evren Ceritoğlu, and Semih Tümen. IZA Journal of Labor Policy. 6:5 (2017).
Abstract
Civil conflict in Syria, started in March 2011, led to a massive wave of forced immigration from Northern Syria to the Southeastern regions of Turkey, which later had serious economic/political repercussions on the MENA region and most of Europe. This paper exploits this natural experiment to estimate the impact of Syrian refugees on the labor market outcomes of natives in Turkey. Using a difference-in-differences strategy, we find that immigration has considerably affected the employment outcomes of natives, while itsimpact on wage outcomes has been negligible. We document notable employment losses among informal workers as a consequence of refugee inflows. Formal employmentincreased slightly potentially due to increased social services in the region. The majority of those who lost their informal jobs have either left the labor force or remainedunemployed. Formal employment and unemployment rates have increased, while labor force participation, informal employment, and job finding rates have declined amongnatives. Disadvantaged groups, i.e., women, younger workers, and less-educated workers, have been affected the worst. The prevalence of informal employment in the Turkishlabor markets has amplified the negative impact of Syrian refugee inflows on natives’ labor market outcomes. Overall, the impact of Syrian refugee inflows on the Turkish labormarkets has been limited, which suggests that the potential costs on the European and other affected labor markets might also be limited.
"The Empirical Content of Season of Birth Effects: An Investigation with Turkish Data" with Semih Tümen. Demographic Research. 37 (2017).
Abstract
Although the season of birth variable is often used as an instrumental variable to estimate the rate of returns to schooling in the labor economics literature, there is an emerging consensus that the season of birth is systematically associated with later outcomes in life such as the educational and labor market success; thus, it is highly likely non-random. Using a large micro-level data set from Turkey, we argue that the degree of this non-randomness can be even larger in a developing-country context. Specifically, we show that around 20 percent of all individuals in Turkey have January as their month of birth due to a combination of geographical, seasonal, institutional, and idiosyncratic factors that lead to misreporting. We further document that being January-born strongly predicts worse socio-economic outcomes in later life. We show that this can be a serious problem in evaluating policies that define eligibility based on the month of birth – such as compulsory schooling and compulsory military service laws that set the eligibility birth date cutoff as the January 1st. We confirm the validity of this concern based on a series of regression discontinuity design exercises. We conclude that, in a developing-country context, additional caution should be exercised when using the season-of-birth variable as a statistical tool.
“The Effects of Compulsory Military Service Exemption on Education and Labor Market Outcomes: Evidence from a Natural Experiment” with S. Tümen. Economics of Education Review. 54: 16-35 (2016).
Abstract
Based on a law enacted in November 1999, males born on or before December 31st 1972 are given the option to benefit from a paid exemption from compulsory military service in Turkey. Exploiting this natural experiment, we devise an empirical strategy to estimate the intention-to-treat effect of this paid exemption on education and labor market outcomes of the individuals in the target group. We find that the paid exemption reform reduces the years of schooling among males who are eligible to benefit from the reform relative to the ineligible males. In particular, the probability of receiving a college degree or above falls among the eligible males. The result is robust to alternative estimation strategies. We find no reduction in education when we implement the same exercises with (i) data on females and (ii) placebo reform dates. The interpretation is that the reform has reduced the incentives to continue education for the purpose of deferring military service. We also find suggestive evidence that the paid exemption reform reduces the labor income for males in the target group. The reduction in earnings is likely due to the reduction in education. It should be noted, however, that due to the characteristics of the population on the treatment margin, the external validity of these results should be assessed cautiously.
"Immigration, Housing Rents, and Residential Segregation:Evidence from Syrian Refugees in Turkey" (Working Paper) (Joint with Binnur Balkan, Elif Özcan Tok, Semih Tumen)
Abstract
The massive inflow of Syrian refugees is argued to drastically affect various social and economic outcomes in the hosting countries and regions. In this paper, we use micro level data to investigate whether the Syrian refugee inflows have affected the market for housing rentals in Turkey. The unexpected arrival of a large number of refugees due to civil conflict in Syria is used to construct a quasi-experimental design. Since the construction of new housing units takes a long time, refugee inflow resembles a positive demand shock to the sector. We find that the refugee inflows have led to an increase in the rents of higher quality housing units, while there is no statistically significant effect in the rents of lower quality units. This finding supports a residential segregation story, which suggests that the refugee wave has increased the demand for native-dominant neighborhoods with better amenities especially among natives. We argue that negative attitudes towards refugees – potentially due to refugee-native conflict along several dimensions – may be generating this result.