Redistribution through Covid-19: Understanding the decline in industry-level wage shares in Turkiye between 2013 and 2021

This study examines the distributional effects of the COVID-19 pandemic in Turkiye through manufacturing industry wage shares, which are mostly neglected in the literature. We use wage shares to focus on the production process instead of personal income distribution, which can be biased in extraordinary periods like pandemics. The study aims to identify the determinants of the wage share between 2013 and 2021 in Turkiye, which is positioned in labour-intensive production in the international value chain, and to reveal the impact of the pandemic on these determinants. Estimations made with industry-based unbalanced panel data collected from the Revenue Administration revealed that the wage share reduced by more than 27% during the pandemic, and more than 50 percent of this reduction was caused by the COVID-19 pandemic. In addition, the study shows that the effect of the pandemic on the wage share was harsher in low-skilled labour-intensive sectors. Our findings contradict the literature claiming that there was no deterioration in income distribution during the pandemic.