Chapter

The Impact of Financial Liberalization and the Rise of Financial Rents on Income Inequality: The Case of Turkey

A. Erinc Yeldan

in Inequality Growth and Poverty in an Era of Liberalization and Globalization

Published in print March 2004 | ISBN: 9780199271412
Published online August 2004 | e-ISBN: 9780191601255 | DOI: http://dx.doi.org/10.1093/0199271410.003.0014

Series: WIDER Studies in Development Economics

 The Impact of Financial Liberalization and the Rise of Financial Rents on Income Inequality: The Case of Turkey

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This is the third of five country case studies on income inequality, and investigates the impact of financial liberalization and the rise of financial rents on income inequality in Turkey. The chapter has five sections: Introduction; Indicators of Income Distribution: The Evidence—a broad overview, and evidence on the patterns of income distribution in Turkey over the last three decades; Macroeconomic Adjustment under Financial Liberalization and the Rise of Financial Rents—a discussion of the evolution of functional categories of income that includes an account of the macroeconomic adjustment; The Rising Fiscal Gap and the Role of the State in Regulating the Distributional Structure—a detailed analysis of the rise in public sector deficits and the distributive consequences of the widening fiscal gap; and Concluding Comments and Overall Assessment. Sect. 3 looks at the inherent tensions caused by the macroeconomic disequilibria embodied in the process of integration with world markets under conditions of a poorly supervised banking system and underdeveloped and fragile domestic asset markets; here, it is found to be analytically convenient to decompose the path of Turkish liberalization after 1980 into two major subperiods partitioned by the strategic step of capital account deregulation—which took place in 1989 and was completed by the full integration of the domestic market into global financial markets. This section also studies the patterns of the wage cycle and productivity growth using quantitative filtering techniques, and reports on the disassociation of labour remunerations from the productivity gains in the real sphere of the economy.

Keywords: banking system; capital account deregulation; capital accounts; case studies; deregulation; domestic asset markets; financial liberalization; financial rents; Fiscal Gap; income; Income Distribution; income inequality; inequality; integration with world markets; labour remuneration; liberalization; Macroeconomic Adjustment; productivity gains; productivity growth; public sector deficits; Turkey; wage cycle

Chapter.  9345 words.  Illustrated.

Subjects: Economic Development and Growth

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