THE RELATIONSHIP BETWEEN INCOME DISTRIBUTION AND DEVELOPMENT: THE CASE OF TURKEY

Abstract

This study aims to determine whether income inequlatiy in Turkey is an obstacle in economic development or not. For this purpose, the gini coefficient are used as a measure income inequality and real GDP is used as an economic growth indicator between the years of 1990-2015. Johansen co-integration method is utilized in the analysis of the study. Co-integration analysis has shown a long-term relationship between the ginicoefficient and economic growth. In order to determine the direction of causality, the error correction model is applied. The findings indicate that the direction of causality runs from economic growth to gini coefficient. This result shows that economic growth is an important factor in the reduction of income inequlatiy. Empirical result reveals also that the reduction of income inequlatiy through economic growth is the curicial factor for Turkey’s economic development.