Household Consumption, Household Indebtedness, and Inequality in Turkey

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  Quality of Statistical Match of Household Budget Survey and SILC for Turkey

  Thomas Masterson and Özlem Albayrak
  Abstract

  This paper presents the quality analysis of the statistical matching conducted for a research study on household consumption behavior, household indebtedness, and inequality for Turkey. The match has been done for four years (2005, 2008, 2009, and 2012) of Household Budget Surveys (HBS) and the Survey on Income and Living Conditions (SILC). The aim of the statistical matching is to transfer household expenditure data from the HBS to the SILC to create synthetic data sets that have information on household consumption expenditures as well as household income and indebtedness. We are following the methodology of constrained statistical matching, using estimated propensity scores developed in Kum and Masterson (2010) to produce the synthetic data sets that we need. The analysis shows that the match is of high quality.

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• Working Paper No.1037 10 January 2024

  Markups, Profit Shares, and Cost-Push-Profit-Led Inflation

  Michalis Nikiforos, Simon Grothe and Jan David Weber
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  The post-pandemic surge in inflation was accompanied by a surge in the corporate share of profits. As a result, several economists and policy makers have given to it names such as “profit-led inflation” or “sellers’ inflation.” The present paper discusses the extent to which profit-led inflation, as an explanation for the recent surge in inflation, is compatible with what we know about the price-setting behavior of firms, income distribution, and inflation. We do that in juxtaposition to two recent critiques: that the increase in the profit share is the result of cyclical factors, and that the increase in import prices leads to higher profit shares even under constant markups. We show that there is little evidence that the recent surge in profitability is cyclical in nature. Moreover, after outlining the Structuralist/Kaleckian theories of prices and inflation we argue that profit-led inflation does not require an increase in the markup of the firms and is consistent with these theories. In the face of large import and other price shocks even under constant markups, firms are able to pass the burden of adjustment to real wages. Thus, the term profit-led emphasizes the distributional source and consequences of inflation. We also provide an empirical examination of the markups in the post-pandemic period using data from the Compustat database. We show that, on average, firms were able to increase or maintain their markups, although there is significant heterogeneity across sectors or the position of the firms in the distribution of markups.

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• Working Paper No.1028 21 August 2023

  Contractionary Effects of Foreign Price Shocks (and Potentially Expansionary Effects of Inflation)

  Michalis Nikiforos and Simon Grothe
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  Using the model proposed in Krugman and Taylor’s “Contractionary effects of devaluation” (1978), we examine the macroeconomic effects of shocks to foreign prices. We show that these shocks can be contractionary for two reasons: (i) because they imply a loss of income if an economy has a trade deficit or import prices increase proportionally more than export prices; (ii) because there is a redistribution of income from wages to profits and rent, which leads to a decrease in consumption and output (as the wage earner's propensity to consume is higher than those of profit earners and rentiers). An endogenous reaction of nominal wages to the increase in the price level might lead to even higher increases in prices, but mitigates the negative macroeconomic effects of the foreign price shocks because it reduces their negative distributional effects. If the proportional increase in nominal wages is higher than that of domestic prices, the distributional effect becomes positive. The opposite is the case with markups. If they increase in reaction to higher prices, they contribute to further price increases but they also exacerbate the negative distributional effects. The paper also provides an analytical solution for a general case of the model of Krugman and Taylor.

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