Firms and wage inequality in Türkiye: Learning from matched employer-employee data

This study analyzes wage inequality in Türkiye from 2012 to 2023 using decomposition and econometric methods, examining the respective roles of workers and firms across the entire period and two subperiods: 2012–2018 and 2019–2023. The findings show that while worker characteristics are the primary source of wage inequality, firm-specific factors also play a significant and growing role. In the 2019–2023 period, marked by macroeconomic instability, wage disparities widened, driven largely by firm specific wage premiums and increased sorting, as high-paying firms attracted more skilled workers. Our decomposition shows the between-firm component holds slight majority compared to within-firm components, with the between-firm component becoming increasingly prominent. Sectoral patterns reveal greater inequality in technologically advanced and export-oriented industries. Despite productivity growth, wage increases have remained limited, indicating weak rent-sharing. Overall, the results highlight the complex interaction between firm dynamics and workforce composition in shaping wage inequality in Türkiye.