Francisco L. Rivera-Batiz and Mine Durmaz
The Programme for International Student Assessment (PISA) studies the extent to which 15-year-old students have acquired key knowledge and skills in reading, mathematics, science and problem solving. PISA test scores reflect not only what the students have learned but also how well they can apply that knowledge. The results of PISA for Turkey show a significant improvement in average test scores over time. In Mathematics, Turkey’s average test score rose from 423 in 2003 to 448 in 2012, the highest increase for any country sampled in this period except Brazil.
Because Turkey has had a period of sustained growth in per-capita income since 2002, the gains in tests scores in the country could simply be a reflection of a pure income effect: with higher family income, students have greater home resources –computers, internet access, encyclopedias, etc.—which allow them to learn more. This study estimates that close to half of the gain in PISA math tests scores between 2003 and 2012 is plainly due to rising family socioeconomic background in the country. However, this also means that the remaining half is connected to other factors that influenced student achievement, including school-related reforms. The most important of these are: improvements in the quantity and quality of schools serving low-income families and those in less-populated areas, improved enrollment and achievement of girls, and rising teacher quality as reflected, for example, in growing teacher expectations in the classroom. At the same time, the study identifies some factors that acted to reduce tests scores between 2003 and 2012: greater student absenteeism (as identified by school principals), which suggests declining student motivation in schools, and rising overage, that is, the presence of older students in any given grade.
Seyfettin Gürsel and Mine Durmaz
Our second research brief studying the problem of informality focuses on regional disparities. There are large differences in regional rates of informal employment. According to 2013 data, while the country’s informality rate of 37 percent is soaring to 70 percent in Southeast region, it recorded about 16 percent in Ankara and Istanbul. The rate of informality for wage earners, which is reported as 20 percent overall, is more than 40 percent in Southeast region and ranges between 10 and 16 percent in highly industrialized western regions. In addition, significant decrease in overall informality at country level in the period 2005-2013 has been unequal through regions. While the overall informality rate decreased by 38 percent, it has been reduced by more than half in western regions. Correspondingly, decreases are more limited in other regions, but also in some regions informality increased.
The main force behind regional disparities in terms of informality is regional differences in structural determinants of informality such as average level of education, average firm size, or sectoral distribution of employment- that affect the level of informal employment. In last eight years, this unequal improvement in informality across regions arises from unequal regional changes in these structural determinants.
Seyfettin Gürsel, Zümrüt İmamoğlu and Barış Soybilgen
ECONOMY CONTRACTED IN THE SECOND QUARTER
Turkey’s real Gross Domestic Product (GDP) increased at a rate of 2.1 percent in the second quarter of 2014 from the same quarter of the previous year. Seasonally adjusted GDP declined by 0.5 percent in the second quarter from the previous quarter. The economy contracted for the first time since the first quarter of 2012.
The contraction was caused by declines in consumption, investment, government expenditures and exports in the second quarter compared to the previous quarter. Private consumption and investment declined by 0.4 percent and 0.7 percent, respectively. Government spending and exports fell 3.3 percent and 0.7 percent, respectively. The contribution of net exports to the growth was negative. The only component that increased in the second quarter was inventory investment. It increased by 1.0 percent. In the first quarter of 2014, growth was strong, 1.9 percent qoq, due to high foreign demand. Private domestic demand, on the other hand, had shrank in the first quarter. We see that domestic demand continued to decline in the second quarter. In addition foreign demand also decreased causing the economy to contract.
Low growth reduced the current account deficit. The 12-month current account deficit to GDP ratio which was 7.5 percent at the end of the first quarter fell to 6.5 percent at the end of the second quarter. Gold excluded current account deficit fell to 5.9 percent from 6.4 percent.
Seyfettin Gürsel and Mine Durmaz
During the period of 2005-2013, informal employment declined significantly. Overall informality rate decreased from 48.2 percent to 36.8 percent and informality in non-agricultural sectors fell from 34.3 percent to 22.4 percent. The main force behind this improvement is the decline in informality among wage earners. However, the decrease of informality rate for self-employed workers is limited. Hence, the problem of informality in Turkish labor market requires studying these two categories of employment separately. The main reason for the decline in informality among wage earners is that newly created jobs in recent years are mostly formal jobs. Informal employment is substantially a consequence of social and structural features of labor force. In addition, the level of informal employment is affected by economic conjecture. According to seasonally adjusted monthly data over last eight years, overall informality rate followed a fluctuating trend. In next research brief, trend in the rate of informality over time will be discussed.
The main structural features studied in this research brief point out that the problem of wage earners’ informality is associated with the problem of small size of the firms. According to 2013 data, third-fourth of informal wage earners is employed in micro firms (0-9 workers). When informal employment in SMS’s (10-24 workers) is added to this share, it reaches 85 percent. Findings of this study reveal that policies aimed at reducing structural informality in the employment category of wage earners need to prioritize reducing out-of-labor costs, encouraging firms in size enlargement, and increasing frequency of inspection.