The effect of informal economy on income inequality: Evidence from Turkey | Zendy

Adem Yavuz Elveren | Zendy; Gökçer Özgür | Zendy

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The effect of informal economy on income inequality: Evidence from Turkey

Author(s) -

Adem Yavuz Elveren,

Gökçer Özgür

Publication year - 2016

Publication title -

panoeconomicus

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.289

H-Index - 14

eISSN - 2217-2386

pISSN - 1452-595X

DOI - 10.2298/pan1603293e

Subject(s) - economics , cointegration , economic inequality , informal sector , inequality , index (typography) , unemployment , proxy (statistics) , granger causality , income inequality metrics , income distribution , demographic economics , labour economics , macroeconomics , econometrics , economic growth , mathematical analysis , mathematics , machine learning , world wide web , computer science

By considering the manufacturing pay inequality index as a proxy for overall income inequality and a novel index for the informal economy, this study analyzes the relationship between income inequality and the size of the informal economy in Turkey for the first time during the period of 1963-2008. For this purpose, we employ a time-series analysis with the Johansen cointegration test, a vector error correction model and the Granger causality tests. The findings suggest that while an increase in income inequality and foreign trade competitiveness leads to an expansion of the informal sector, unemployment has negative effects on the informal sector

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