The Impact of the Minimum Wage on Wage Distribution: The Evidence from Turkey

Year 2018, Volume: 7 Issue: 1, 17 - 59, 01.01.2018

Selin Pelek

Abstract

In this paper, we investigate the effect of the minimum wage on the entire system of wage distribution. More specifically, we address the issue of wage inequality by taking into account the potential distributional outcomes of minimum-wage legislation. We decompose the wage differences and the variations in the wage inequality before and after the sizable minimum-wage boost in 2004, following the methodology introduced by DiNardo, Fortin, and Lemieux (1996). We use a non-parametric reweighting approach to decompose the effects of the minimum-wage hike as well as other factors that may have affected the wage distribution. Our main findings confirm that the minimum wage played a pivotal role in reducing wage inequality for both Turkish male and female wage earners between the years 2003 and 2005.

Keywords

Minimum wage, wage inequality, counterfactual distributions

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