Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/157213
Authors: 
Guney, Ibrahim Ethem
Hacihasanoglu, Yavuz Selim
Tumen, Semih
Year of Publication: 
2017
Series/Report no.: 
GLO Discussion Paper 58
Abstract: 
We investigate the impact of a substantial minimum wage increase, which became effective in January 2016, on consumer loans in Turkey. Using bank-level data and designing an original identification strategy, we ask whether the loans provided by banks with a historically high share of low-wage loan customers have increased relative to those provided by banks with a historically low share of low-wage loan customers after January 2016. Our results suggest that consumer loan flows have displayed a limited but statistically and economically meaningful increase following the minimum wage hike. This increase mostly comes from the increase in long-term general-purpose loans. Vehicle loans have also increased, while there is no change in housing loans. In the overall, the minimum wage hike has generated a moderate and transitory increase in the flow of consumer loans extended to low-wage earners in Turkeyerhaps due to delayed consumption effect. Consumption of durables, which can further increase household borrowing capacity through collateralized debt channel, has only slightly and temporarily increased. The underlying long-term trends in the stock of consumer loans have hardly changed.
Subjects: 
Consumer loans
labor income shocks
minimum wages
triple difference
JEL: 
D14
E24
G21
J31
Document Type: 
Working Paper

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