Labor Supply and Welfare Benefits in Turkey

Abstract

The studies reveal that the welfare programs have disincentive effects on the labor supply decision of individuals. Therefore, recently, they have been reformed in developing and developed countries. In the last decade, increasing share of unilateral state transfers in total household income and decreasing annual hours of work of household heads have connoted disincentive effects of social assistance programs in Turkey as well. This paper examines whether there is an association between these two variables for urban resident male household heads. The sample, pooled cross-sections of Household Budget Surveys (2002-2011), is divided into five income groups and regression analyses are conducted. The results reveal that disincentive effects of welfare receipts are statistically significant for all quintiles. However, the effect is not more than 2% even for the poorest households. These negligible effects could be attributed to the socio-economic characteristics of households and their heads. Moreover, the results of the disaggregation of total state transfers into cash and in-kind components show that welfare policies should diversified according to income level of households.