The effects of financial development and tax on income inequality in Turkiye: The financial Kuznets curve hypothesis

Çisem Bektur

doi:10.55094/hoec.2173

Authors

Çisem Bektur Sakarya University / Türkiye 0000-0001-9220-5932

10.55094/hoec.2173

Abstract

One of the factors that ensure the peace of society in a country is the fair distribution of income in that country. With the access of individuals to financial resources, the level of income increases, and this increase makes income distribution an even more important issue. Financial development is an important factor that can prevent income inequality. Kuznets approach put forward by Kuznets (1955) has been named the financialKuznets curve (FKC) with the finding of Greenwood and Jovanovic (1990). According to their theoretical stipulations, an inverted-U relation between financial sector development and income inequality exists. The main purpose of this study is to investigate whether financial development and tax have an effect on income distribution in the Turkish economy between the period of 1995-2021. Longterm estimation via ARDL boundary test indicates that the variables are cointegrated. It is revealed that the FKC hypothesis is not valid in the selected period.

Keywords:

Financial Kuznets Curve Income Inequality Financial Development ARDL Bounds Test

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