Structural Transformation, Income Inequality, and Employment Linkages in Turkey's Regions

Abstract

During the post-2001 period of Turkey, the services, industry and agricultural sectors' employment and value added share have undergone significant changes. The main purpose of this study is to investigate structuralist transformation at a regional level for Turkey and set up links between structural transformation and income inequality for the years between 2006 and 2018. In this context, primarily, sectoral shifts in employment share has been analysed by using shift share analysis at NUTS-1 level. Secondly, a fixed effects panel data model has been implemented for the analysis of linkages between income inequality and sectoral employment shares. The first conclusion is that, Turkey's region has undergone structural transformation meanwhile deindustrialization is accompanied by tertiarisation. The greatest increase has been realised in the service employment share and the industry has become of secondary importance. The second main conclusion is related with the linkages between income inequality and sectoral employment shares. At NUTS-1 level, the relation between the industrial employment share and income inequality is found to be weak. Additionally, the share of service employment is found to be significant in determining income inequality data. Briefly the service employment share has consequences that have a negative impact on income equality.