Qual Quant (2012) 46:1261–1270
Minimum wage is efﬁcient wage in Turkish labor market:
Melike E. Bildirici · Elçin Aykaç Alp
Published online: 1 April 2011
© Springer Science+Business Media B.V. 2011
Abstract This study has two main purposes. First one is the necessity of taking minimum
wages into account, if there is a purpose to analyze the relationship between wages and
productivity in an economy which has high unemployment rates and informal employment.
Second one is about the analyzing method of this relationship. We choose TAR cointegration
analysis for this relation. First step of this analysis is testing for stationarity of the variables.
However the low power of traditional unit root tests is examined and proved in many stud-
ies but not taken into account in TAR cointegration studies in literature. This study shows
that traditional unit root tests are unfavorable for the variables which have TAR structures.
Because of this shortcoming of traditional unit root tests, these results must be supported
with TAR unit root tests.
Keywords Wage · Productivity · Non linear · TAR unit root · TAR cointegration
JEL Classiﬁcation C32 · J31
In studies on productivity, it is accepted that increases in productivity can be achieved through
prior wage rises or alternatively, through wage rises in return for increases in productivity.
Both views are debated in the literature with various dimensions. The latter view is known in
literature as efﬁciency wage theory. In labor market, the relationship among wages, produc-
tivity and unemployment rate attracts attention of many researchers and a number of papers
were discussing the efﬁciency wage, while some works tested the relationship between wages
and productivity. The efﬁcient wage approach has been intensely debated after 1980 and
M. E. Bildirici (
) · E. Aykaç Alp
Faculty of Economic and Administrative Sciences, Yildiz Technical University, Istanbul, Turkey
E. Aykaç Alp