The effects of globalization over wage and income inequality in Turkey

This thesis examines the effects of globalization over wage and income inequality in Turkey. Traditional trade theory predicts that as a result of trade liberalization in developing countries, unskilled labor wages will be affected in a positive way and wage inequality between skilled and unskilled labor will be reduced. However, studies indicate that wage inequality in many developing countries have increased.In this study, sectoral and regional inequality in the neo-liberal era in Turkey have been analyzed by decomposing the contributions of sectors and regions to inequality. According to inter-sectoral and inter-regional wage inequality analysis which exploits Theil?s T statistic, inter-regional inequality increased in the 1980s, has shown a declining trend since the mid-90s. However, in 2009, wage inequality was higher than inequality in wages in 1980, starting year of Turkey's openness policy. In the neo-liberal period, inequality between Turkey?s Eastern and Western regions haven?t declined. Another finding of the study is the increasing trend during the crisis years in inter-sectoral and inter-regional wage inequality.In the study also the effect of trade liberalization over the regional wage and income inequality was investigated by panel data analysis. According to the econometric model estimation results, in the 2000s the increase in the region's foreign trade volume has had no significant effect on within region wage inequality between sub-sectors of the manufacturing industry, but there is evidence that it has had significant positive effect on within region wage inequality between the main eleven sectors of the economy. Furthermore, the increase in the region?s foreign trade volume increases income inequality in the region.