Abstract
Abstract This paper examines the role of non-wage cost rigidities in slowing down employment creation by assessing the effect of a policy aimed at fostering employment for women and young men introduced in Turkey in 2008. Exploiting a difference-in-difference-in differences strategy, I assess the employment effect of the reduction in the employer contribution share of the social security premiums. The results, net of the recent crisis effect, suggest a positive effect of the reduction in non-wage costs on employment creation for the targeted group (women) shortly after the announcement of the policy. JEL Classification C31; J08; J21; J32
Highlights
The employment rate in Turkey, fluctuating between 40%–50%, has been ranking the lowest in Europe for the last decade
A number of national and international surveys point at high non-wage costs, high social security contributions in Turkey that create a burden on employers, and this in turn discourages employment creation in the formal sector while encouraging informal employment (OECD 2007; TCEA 2006; World Bank 2006)
The same parameter is estimated in each column of the table, each column represents a different specification changing depending on the restriction imposed, as described in the previous section
Summary
The employment rate in Turkey, fluctuating between 40%–50%, has been ranking the lowest in Europe for the last decade. A number of national and international surveys point at high non-wage costs, high social security contributions in Turkey that create a burden on employers, and this in turn discourages employment creation in the formal sector while encouraging informal employment (OECD 2007; TCEA 2006; World Bank 2006). This view, shared by the Turkish policy makers, was embodied in a policy intervention legislated in May 2008. The main goal of this paper is to conduct a micro-econometric analysis to evaluate the effectiveness of this policy in creating formal employment for the targeted group (women), something that, to the best of my knowledge, has not been done yet
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