Fiscal policies towards solving income equality: A comparative analysis of Türkiye and Scandinavian countries

Income inequality is considered a significant issue on a global scale in terms of economic growth, social welfare, and societal sustainability. Technological changes, the presence of artificial intelligence, and structural changes and characteristics such as international migration have caused the injustice in income distribution to deepen further in recent years due to increasing economic crises. In this context, the redistributive function of fiscal policies, particularly through public spending and taxes, plays a critical role in reducing income inequality. The aim of this study is to analyze the effects of fiscal policies implemented in Scandinavian countries on income inequality and to provide applicable policy recommendations for Turkey. Within the scope of the study, basic information on income inequality is provided, and the Gini coefficient is used to measure income inequality. In the study, total public expenditures, subcomponents of expenditure types, total taxes and tax types, as well as some macroeconomic indicators were considered as variables. The panel data analysis method was used to test the effects of the relevant variables. The analysis results indicate that total public expenditures have a beneficial effect on income distribution, while the impact of total taxes on income distribution is uncertain. Additionally, it has been concluded that budget deficits have a negative impact on income distribution, while the effects of inflation and unemployment on income distribution are uncertain, and fixed capital formations have a justice-promoting effect on income distribution. When considering the functional classification of public expenditures, it has been determined that in Scandinavian countries, the impact of expenditures on defense services, public order and safety services, housing, and community welfare services on income inequality is uncertain; expenditures on general public services, environmental protection services, social security, and social assistance services have a justice-enhancing effect on income distribution; and expenditures on economic affairs and services, health services, and education services have a justice-diminishing effect on income distribution. Finally, the analysis results indicate that income taxes, social security and social assistance contributions, and property taxes have a redistributive effect on income distribution, while the impact of indirect taxes is uncertain. In line with these findings, it is recommended to implement targeted, social welfare-based, and strongly redistributive fiscal policies to ensure justice in income distribution in Türkiye.