The relationship between income distribution and human development: Evidences from Turkey and selected countries

The issue of income inequality attracts the attention of many researchers in social sciences, especially economists. The scope, causes and consequences of income inequality, which has become a deeper problem with the technological revolution, have been the subject of many empirical studies. Studies in the literature generally associate income inequality with income level. Therefore, the human factor is mostly excluded from the analysis. In this study, the relationship between the human development index, which is a more comprehensive indicator than income since it includes education and health indicators, and income inequality has been analyzed using econometric methods. In the analyses using the Gini coefficient and the human development index developed by UNDP, time series techniques were used for Turkey and panel data techniques were used for 25 developed countries and 21 developing countries. Data for the period 1990-2017 were used for 47 countries in total. In the unit root and cointegration analysis, tests with structural breaks and tests without structural breaks are used. In all analyzes, cointegration relationship and one-way causality relationship from human development index to gini coefficient were determined. The relationship between the two variables were found negative for the developing countries and Turkey, were found positive for developed countries. Analysis results have shown that progress in human development render more equitable income distribution in Turkey and developing countries. For 25 developed countries, it was found that there is an opportunity cost between human development and income distribution. This result gives an idea to increase their investment in education and health in developing countries and Turkey who want to ensure justice in income distribution. In developed countries, the income earned by the richest and the great rents created by the technological revolution deepen the income inequality. The implementation of universal basic income and progressive taxation policies increases its importance in ensuring social peace.