Social Transfers and Labor Force Participation Relation in Turkey: A Bivariate Probit Analysis

ABSTRACT

This study explores the association of labor force and social assistance program participation decisions in Turkey by employing the 2011 household budget survey (HBS) data. The issue is investigated in a bivariate probit framework, where the two incidences are jointly modeled. The differences in rural and urban behavior are also explored. Empirical results indicate that the more one works, the less one participates in social transfer program, and vice versa. Additionally, age, gender, household type and composition impact decision-making process of individuals both in urban and rural areas. The negative association between labor force participation and social transfer program participation is more pronounced in urban areas compared with the rural areas.

KEY WORDS:

• bivariate probit model
• labor force participation
• social transfers
• Turkey

JEL Classification:

• C35
• I38
• J21
• H53.

Notes

1. For further information regarding the types of the assistance programs and eligibility criteria, please see the Annual Reports of Ministry of Family and Social Assistance, available on http://sgb.aile.gov.tr/data/5434f307369dc31d48e42dc5/2014_idare_faaliyet_raporu.pdf.

2. For an elaborate exposition of underlying theoretical framework, please see Kilkenny and Huffman (2003) and Kang, Huffman, and Jensen (2004).

3. Please see Kilkenny and Huffman (2003), Huffman and Kilkenny (2007), and Ferro, Kassouf, and Levison (2010) for the estimation of wage equation utilizing Heckman method.

4. Additionally, to tackle the endogeneity and selection problems which might have been encountered, bivariate probit estimations are also carried out for the two major sub-groups of social transfers, namely conditional cash transfers and Green Card payments. Estimation results are not presented to conserve space, but available upon request. The estimation results are similar to the general model. In both cases, there is a negative association between labor force participation and each of the social transfer program participations.

5. Alternative models have also been estimated where the impact of the employment status of the partner/spouse on employment status and social transfer program participation incidence are explored. The estimation results, which are available upon request, are in line with those reported in the article.