Course of Income Inequality in Turkey

Abstract

The simultaneous treatment of growth, inequality and poverty is useful from a policy perspective in the sense that it enables decision makers to choose the combination of mutually beneficial policies that have positive impact on all three variables. Also, public policies tend to affect inequality mainly indirectly through their impact on growth and poverty. Turkey, as being one of the developing countries, has high-income inequality since its Gini coefficient was around 0.40 in last decades according to Turkish Statistical Institute. Its income distribution has been improving slightly; however, it is still so much behind the developed countries’ levels. Inequalities in the wealth distribution can have significant negative impacts on growth where credit market constraints prevent the poor from making productive indivisible investments. This can be overcome by the provision of credit or redistribution of assets by taxes and other interventions. Redistribution of assets not only causes to increase growth and reduce inequality, but also reduces the poverty directly by insuring the poor against the macroeconomic shocks or volatilities.