Labor Mobility across the Formal/Informal Dividein Turkey: Evidence from Individual Level Data

Informality has long been a salient phenomenon in developing country labor markets, thushas been addressed in several theoretical and empirical research. Turkey, given its economicand demographic dynamics, provides rich evidence for a growing, heterogeneous andmultifaceted informal labor market. However, the existing evidence on labor informality inTurkey is mixed and scant. Along these lines, we aim to extend the existing literature byproviding a diagnosis of dynamic worker flows across distinct labor market states andidentifying the effects of certain individual and job characteristics on variant mobility patterns.More specifically, we first develop and discuss a set of probability statistics based on annualworker transitions across distinct employment states utilizing Markov transition processes. AsBosch and Maloney (2007:3) argue: “labor status mobility can be assumed as a process inwhich changes in the states occur randomly through time, and probabilities of movesbetween particular states are governed by Markov transition matrices”. Towards this end, wewill use the novel Income and Living Conditions Survey (SILC) panel data set to compute thetransition probabilities of individuals moving across the labor market states of formal-salaried,informal-salaried, formal self-employed, informal self-employed, unemployed and inactive.The transitions analysis is conducted separately for two, three and four year panelspertaining to 2006 to 2007, 2006 to 2008 and 2006 to 2009 transitions; for total, male andfemale samples; and lastly for total and non-agricultural samples. In this way, we aim tocontribute to the limited body of stylized facts available on mobility and informality in theTurkish labor market. Next, we conduct multinomial logit regressions individually for each setof panel to identify the impact of individual characteristics (i.e. gender, age, education level,work experience, sector of economic activity, firm size, number of other household members,having/not having children, rural/urban) underlying worke