Revisiting poverty and income inequality for Turkey

This study revisits a distinctive topic which is regarded to offer endless ways of research. The impact of poverty on income inequality has been considered a dynamic issue from the beginning of economic history (Smith, 1776), especially for developing (emerging) economies. The conventional approaches of income inequality and poverty are based on the empirical analysis of household labor force participation survey results with a mixture of other well-known variables. This paper differs from the previous literature by employing some unconventional survey data results-trying to extract information from the expectations of producers-and inflation which has the greatest distortion on income inequality for the emerging market of Turkey. Given the rationality of expectations, we believe that producers’ survey results should include relevant information about the future consumption patterns of households (and thus poverty). Hence, the Retail Sector Confidence Survey (TEPE of TEPAV) is taken as a proxy for poverty (consumption) and the Consumer Price Index (TÜFE of TUİK) as a proxy for income inequality. The data set is monthly and runs through January 2011 – July 2015. The econometric methods employed consist of the recently developed and rather superior frequency-domain causality (Breitung and Candelon, 2006) and wavelet comovement analysis (Rua, 2010). These serve better than the previous methods due to their frequency time dimension aspects and are capable of capturing the information in the nonlinear time series. Our results show that food consumption is one of the most significant determining factors of both income inequality and poverty whereas transportation and miscellaneous other goods and services are also important for Turkish economic agents.