RURDS Vol. 22, No. 1, March 2010 doi: 10.1111/j.1467-940X.2010.00169.x WAGE INEQUALITY IN TURKEY: DECOMPOSITION BY STATISTICAL REGIONS, 1980–2001 Adem Yavuz Elveren Kahramanmaras Sutcu Imam University, Turkey, Department of Economics This paper analyzes wage inequality in the Turkish manufacturing sector annually from 1980 to 2001, and also provides some evidence for inequality in the post-2001 period. Using the between-groups component of Theil’s T statistic, the paper provides more information on wage inequality. It decomposes the evolution of inequality by statistical regions – The Nomenclature of Territorial Units for Statistics – (i.e. NUTS-1 and NUTS-2). The decompositions show that inequality has increased since the late 1980s in the private sector both between regions of NUTS-1 and NUTS-2. 1. Introduction This paper analyzes wage inequality in the manufacturing sector of Turkey between 1980 and 2001, the latest year of available data, and provides some evidence for inequality in the post- 2001 period based on the recent restructured data set. The Turkish economy can be associated with a persistently unequal income distribution. With the adoption of the neo-liberal model in 1980, inequality rose substantially, particularly in the 1990s (Elveren and Galbraith, 2009). The main causes for this deterioration are the negative trend of real wages, a change in tax policies benefiting the rich, a failure of redistributive tax policy, high real interest rates (World Bank, 2000), unequal education (Duygan and Guner, 2006; K¨ ose and G¨ uven, 2007), and excessive migration to urban areas due both to economic and political pressure. Arguing that wage inequality is a good proxy of the overall income inequality in the economy, Elveren and Galbraith (2009) show that wage inequality in Turkey increased after 1980, under the neo-liberal model. Although the public sector has displayed unchanged inequality through the period, its shrinking share has reduced any positive effect on the inequality 1 (ibid. p. 189). They also show that inter-provincial inequality increased sharply between 1987 and 1995 and then declined again, reaching its 1991 level in 2001; inequality between the geographical regions remained almost the same throughout the study period; and the dual structure between poor East and affluent West has been unchanged (ibid. p. 195–196). This paper has a modest goal. Following on from the work of Elveren and Galbraith (2009), this paper aims to add more information to the study of economic inequality in Turkey by 1 The share of the public enterprises in manufacturing sector dropped from 36 % in 1980 to 10% in 2001. Although there is no differentiation in the recent data set, it would not be wrong to argue that as a result of privatization movements in the recent decade the share of public is nowat negligible level. So, in this paper we only deal with the private manufacturing sector. C  The Applied Regional Science Conference (ARSC)/Blackwell Publishing Asia Pty Ltd. 2010. Published by Blackwell Publishing Asia Pty Ltd.