The effect of fiscal policy on income distribution: A research on OECD countries

Ensuring justice in income distribution has been one of the most important problems of the whole world throughout history. The fact that income distribution is not only an economic indicator, but also the cornerstone of social peace and social welfare makes income distribution very important. Taxes and public expenditures are very effective fiscal policy tools in improving income distribution. In this study, the effects of taxes and public expenditures on income distribution are examined. Using the 2004-2017 period data of 24 OECD member countries, the relationship between income inequality, taxes and public expenditures was investigated through panel data analysis methods. In the panel regression model, the Gini index is the dependent variable; Indirect taxes, public expenditures, income tax, corporate tax, wealth taxes and various macroeconomic variables were used as independent variables. According to the results of econometric analysis; In the variables of income tax, wealth taxes, public expenditures and growth, a statistically significant result could not be reached, and it was concluded that indirect taxes had a distorting effect on income distribution. In addition, it has been determined that the increase in inflation, unemployment and population growth rate has a distorting effect on income distribution. Keywords: Income Distribution, Fiscal Policy, Panel Data Analysis, Gini Index, OECD Countries