Reducing Income Inequality in Türki̇ye: What Has Changed and What Can Be Done?
Betül MutlugünGrowing inequalities across the globe since the 1980s have preoccupied the policy agenda of intergovernmental development organizations. The Millennium Development Goals launched in 2000 focused on eradicating poverty by 2015 as their primary goal. Still, all measures of income distribution present the same picture: the falling share of wages in gross domestic product cointegrates with the rise in overall income inequality and the top 1 percent income share. As this challenge has become a universal issue, working towards a more equal distribution of incomes is now part of the United Nations’ Sustainable Development Goals. This chapter combines the personal and functional distribution of income approaches to understand Türkiye’s income inequality. To reach this aim, the study focuses on the share of wages and personal income inequality to show how a rising return to capital relative to wage incomes can surge top income shares. Using a range of data sources from 1970 to 2022, the study conducts a retrospective analysis to evaluate Türkiye’s performance concerning indicators linked to the Sustainable Development Goals. On this basis, the chapter identifies the potential of Sustainable Development Goal Target 10 for reversing income inequalities in Türkiye. It formulates several policy reforms and institutional arrangements to reduce inequalities and flags policy areas that might conflict with tackling widening economic inequality targets.
References
- Adler, M. & Schmid, K.D. (2013). Factor shares and income inequality. Empirical evidence from Germany 2002-2008, Schmollers Jahrbuch, 133(2), 121-132, doi: 10.3790/schm.133.2.121. google scholar
- Araujo, E., Bruno, M. and Pimentel, D. (2012). Financialization against Industrialization: A regulationist appro-ach of the Brazilian Paradox. Revue de La Regulation. Capitalisme, Institutions, Pouvoirs google scholar
- Atkinson, A. B. (2015). Inequality: What Can Be Done?. Cambridge, MA and London, England: Harvard Uni-versity Press. https://doi.org/10.4159/9780674287013 google scholar
- Atkinson, A. B., & Bourguignon, F. (2000). Introduction: Income distribution and economics. In Handbook of Income Distribution (Vol. 1, pp. 1-58). Elsevier. https://doi.org/10.1016/S1574-0056(00)80003-2 google scholar
- Atkinson, A. B., & Bourguignon, F. (2014). Handbook of income distribution. Elsevier. https://books.google. com/books?hl=tr&lr=&id=qwR-BAAAQBAJ&oi=fnd&pg=PP1&dq=atkinson+handbook+income+distri-bution&ots=1TGqf_r0yP&sig=esYK2Hyc0a9VHPx-TpPiHdq27Sk google scholar
- Autor, D. H., Dorn, D. & Hanson, G. H. (2013). The China Syndrome: Local Labor Market Effects of Import Competition in the United States. American Economic Review 103(6), 2121-68. google scholar
- Björklund, A., & Jantti, M. (1997). Intergenerational Income Mobility in Sweden Compared to the United States. The American Economic Review, 87(5), 1009-1018. google scholar
- Bourguignon, F. (2015). The Globalization of Inequality. Princeton University Press. https://press.princeton.edu/ books/hardcover/9780691160528/the-globalization-of-inequality google scholar
- Chancel, L., Piketty, T., Saez, E., Zucman, G., & et al. (2022). World Inequality Report. World Inequality Lab wir2022.wid.world. google scholar
- Correa, E. & Vidal, G. (2012). Financialization and global financial crisis in Latin American countries, Journal of Economic Issues, vol. 46, 541-548. google scholar
- Credit Suisse. (2014). Global Wealth Databook. https://www.credit-suisse.com/about-us/en/reports-research/ global-wealth-report.html google scholar
- Credit Suisse. (2021). Global Wealth Databook. https://www.credit-suisse.com/about-us/en/reports-research/ global-wealth-report.html google scholar
- Cuevas, P. F., Lucchetti, L., & Nebiler, M. (2020). What are the Poverty and Inequality Impacts of Fiscal Policy in Turkey? Commitment to Equity (CEQ) Working Paper Series, Article 100. https://ideas.repec.org//p/tul/ ceqwps/100.html google scholar
- Dao, M. C., Das, M., Koczan, Z. & Lian, W. (2017). Why is labor receiving a smaller share of global income? Theory and empirical evidence, IMF Working Paper WP/17/169. google scholar
- Daudey, E., & Garcia-Penalosa, C. (2007). The personal and the factor distributions of income in a cross-section of countries. Journal of Development Studies, 43(5), 812-829. google scholar
- Demir, F. 2007. The rise of rentier capitalism and the financialization of real sectors in developing countries, Review of RadicalPoliticalEconomics, 39(2), 351-359 google scholar
- Economic Policy Institute. (October 2022). The Productivity-Pay Gap. Retrieved from https://www.epi.org/ productivity-pay-gap/ google scholar
- Elsby, M. W., Hobijn, B., & Şahin, A. (2013). The decline of the US labor share. Brookings Papers on Economic Activity, 2013(2), 1-63. google scholar
- Erauskin, I. (2020). The labor share and income inequality: Some empirical evidence for the period 19902015, Applied Economic Analysis, 28(84), 173-195. https://doi.org/10.1108/AEA-04-2020-0028 google scholar
- European Commission. (2022). Annual macro-economic database (AMECO) [Data set]. https://economy-finan-ce.ec.europa.eu/economic-research-and-databases/economic-databases/ameco-database_en google scholar
- Furceri, D., & Loungani, M. P. (2015). Capital account liberalization and inequality. International Monetary Fund. google scholar
- Giovannoni, O. G., Lu, L., Nguyen, D., & Xu, A. (2014). What do we know about the labor share and the profit share? Part II: Empirical studies. Part II: Empirical Studies (May 21, 2014). Levy Economics Institute at Bard College Working Paper, (804). google scholar
- Guscina, A. (2007). Effects of Globalization on Labor’s Share in National Income. IMF Working Paper No. 06/294, Available at SSRN: https://ssrn.com/abstract=956758 google scholar
- Gürsel, S., Levent, H., Selim, R. & Sarıca, Ö. (2000), Bireysel Gelir Dağılımı ve Yoksulluk: Avrupa Birliği ile Karşılaştırma, TÜSİAD, 2000-12. google scholar
- Harrison, A. (2005). Has Globalization Eroded Labor’s Share? Some Cross- Country Evidence. Mimeo. Uni-versity of California-Berkeley. google scholar
- International Labour Office. (2012). Global Wage Report 2012/13: Wages and Equitable Growth. International Institute for Labor Studies, Geneva: International Labour Organization. Retrieved from https://www.ilo.org/ global/research/global-reports/global-wage-report/2012/WCMS_194843/lang--en/index.htm google scholar
- International Labour Office. (2015). Income inequality and labour income share in G20 countries: Trends, impacts and causes. ILO, OECD, IMF, WB. Retrieved from https://www.oecd.org/g20/topics/employ-ment-and-social-policy/Income-inequality-labour-income-share.pdf google scholar
- Jacobson, M. & Occhino, F. (2012). Labor’s declining share of income and rising inequality, Federal Reserve Bank of Cleveland, available at: www.clevelandfed.org/newsroom-and-events/publications/economic-com-mentary/economic-commentary-archives/2012-economic-commentaries/ec-201213-labors-declining-sha-re-of-income-and-rising-inequality.aspx google scholar
- Kaldor, N. (1961). Capital accumulation and economic growth. In The Theory of capital: proceedings of a con-ference held by the International Economic Association (pp. 177-222). London: Palgrave Macmillan UK. google scholar
- Kalecki, M. (1971). Selected Essays on the Dynamics of the Capitalist Economy 1933-1970. Cambridge Uni-versity Press. google scholar
- Karabarbounis, L. & Neiman, B. (2014). Capital depreciation and labor shares around the world: measurement and implications, Technical Report, National Bureau ofEconomic Research. google scholar
- Kristal, T. (2013). The Capitalist Machine: Computerization, Workers’ Power, and the Decline in Labor’s Share within U.S. Industries, American Sociological Review, 78(3), 361-389. google scholar
- Krugman, P. (2008). Trade and Wages, Reconsidered. Brookings Papers on Economic Activity, 39(1), 103-154. google scholar
- Maliar, L., Maliar, S., & Tsener, I. (2022). Capital-skill complementarity and inequality: Twenty years after. Eco-nomics Letters, 220, 110844. google scholar
- Milanovic, B., & Milanovic, S. S. V. P. P. B. (2010). The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality. ReadHowYouWant.com. google scholar
- OECD. (n.d.). Productivity, Productivity Archives, Unit Labor Costs-Annual Indicators, Labor Income Share Ratios [Data set]. Retrieved May 1, 2018, from https://stats.oecd.org/# google scholar
- OECD. (2021). Income Distribution Database [Data set]. https://stats.oecd.org/Index.aspx?DatasetCode=IDD google scholar
- OECD. (2022). The Short and Winding Road to 2030: Measuring Distance to the SDG Targets,. OECD Publis-hing. https://doi.org/10.1787/af4b630d-en. google scholar
- Paprotny, D. (2021). Convergence Between Developed and Developing Countries: A Centennial Perspective. Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, 153(1), 193-225. google scholar
- Piketty, T. & Saez, E. (2014). Inequality in the long run, Science 344 (6186), pp. 838-843. google scholar
- Rodrik, D. (1998) Capital Mobility and Labor. Harvard University, mineo, available at http://www.hks.harvard">http://www.hks.harvard. edu/fs/drodrik/Research%20papers/capitalm.pdfhttp://www.hks. harvard.edu/fs/drodrik/Research%20pa-pers/capitalm.pdf google scholar
- Roemer, J.E. (1998). Equality of opportunity. Harvard University Press. google scholar
- Roemer, J.E. (2002). Equality of opportunity: A progress report. Social Choice and Welfare, 19, 455-471. google scholar
- Rognlie, M. (2015). Deciphering the fall and rise in the net capital share: accumulation or scarcity?, Brookings papers on economic activity, (1), 1-69. google scholar
- Sachs, J., Lafortune, G., Kroll, C., Fuller, G., & Woelm, F. (2022). From Crisis to Sustainable Development: The SDGs as Roadmap to 2030 and Beyond. Sustainable Development Report 2022. Cambridge University Press. https://www.sustainabledevelopment.report google scholar
- Sauer, P., Rao, N.D. & Pachauri, S. (2020) Explaining income inequality trends, An integrated approach. WIDER Working Paper 2020/65. google scholar
- Stiglitz, J. E. (2012). The Price of Inequality: How Today’s Divided Society Endangers Our Future (1 edition). W. W. Norton & Company. google scholar
- Stockhammer, E. (2013). Why Have Wage Shares Fallen? A Panel Analysis of the Determinants of Functional Income Distribution, International Labour Organization (ILO) project ’New Perspectives on Wages and Economics,’ ILO Working Papers 470913 / Conditions of Work and Employment 35, Geneva: International Labor Organization google scholar
- Sustainable Development Goals | United Nations in Türkiye. (n.d.). Retrieved June 13, 2023, from https:// turkiye.un.org/en/sdgs google scholar
- Taymaz, E., Voyvoda, E., & Yilmaz, K. (2021). Transition to democracy, real wages and productivity: Evidence from the Turkish manufacturing industry. Koç University-Tüslad Economic Research Forum, Working Paper No: 2111. google scholar
- Turkish Statistical Institute. (2022). Income Distribution Statistics [Data set]. https://data.tuik.gov.tr/Kategori/GetKategori?p=gelir-yasam-tuketim-ve-yoksulluk-107&dil=2 google scholar
- Turkish Statistical Institute. (2023). Relatively Poverty Statistics, Number of the relatively poor, poverty rate and poverty gap [Data set]. https://data.tuik.gov.tr/Kategori/GetKategori?p=gelir-yasam-tuketim-ve-yok-sulluk-107&dil=2 google scholar
- United Nations. (2018). The Sustainable Development Goals Report. https://unstats.un.org/sdgs/files/report/2018/ thesustainabledevelopmentgoalsreport2018-en.pdf google scholar
- United Nations. (2019). Turkey’s Sustainable Development Goals 2nd Voluntary National Review Report “Strong ground towards common goals.” High-Level Political Forum on Sustainable Development. https://hlpf. un.org/sites/default/files/vnrs/2021/23862Turkey_VNR_110719.pdf google scholar
- United Nations Department of Economic and Social Affairs SDG Indicators Database. (2021). SDG country profile, Turkey [Data set]. https://unstats.un.org/sdgs/dataportal/countryprofiles/tur google scholar
- U.S. Bureau of Labor Statistics. (2023). Production and Nonsupervisory Employees, Total Private [CES0500000006], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/ series/CES0500000006, August 15, 2023. google scholar
- Velasquez, A. (2023). Production Technology, Market Power, and the Decline of the Labor Share. International Monetary Fund. Working paper No: 32. google scholar
- Wilkinson, R., & Pickett, K. (2010). The spirit level — why equality is better for everyone, London: Penguin. google scholar
- Wolff, E. N., & Zacharias, A. (2007). The Distributional Consequences of Government Spending and Taxation in the U.s., 1989 and 2000. Review of Income and Wealth, 53(4), 692-715. https://doi.org/10.1111Zj.1475-4991.2007.00251.x google scholar
- World Bank. (2019). World Development Report The changing nature of work. https://documents1.worldbank. org/curated/en/816281518818814423/pdf/2019-WDR-Report.pdf google scholar
- World Bank. (2021). World Development Indicators [Data set]. https://databank.worldbank.org/source/world-de-velopment-indicators google scholar
- World Bank. (2023). World Inequality Database [Data set]. https://wid.world google scholar