The effect of economic growth and income inequality on poverty: Nuts-1 regions case

In general terms, poverty can be defined both as the inability to access basic services such as education and health, and as not having an income to meet fundamental human needs such as food, shelter, heating, and clothing, which are necessary for the continuation of life, is the main economic problem of most countries, especially underdeveloped, and developing countries. Beyond being an economic problem, poverty, which creates a wide variety of negative consequences, including moral, social, and political, is accepted as a global problem that needs to be tackled. However, for countries to fight the problem of poverty effectively, it is necessary to determine the causes of poverty first. It is mentioned in related literature that some individual, cultural, social, demographic, and economic factors play an important role in the causes of poverty. Economic growth and income inequality come into prominence among the mentioned economic factors. This study focuses on the impact of economic growth and income inequality on poverty in Turkey as a developing country. In this study, which was carried out employing second-generation (advanced) panel data techniques, data of NUTS-1 regions of Turkey for the period 2006–2019 was used. Westerlund and Edgerton (2007), LM bootstrap panel cointegration, and Augmented Mean Group estimator were used in the empirical analysis, in which poverty is represented by the poverty rate, income inequality by the gini coefficient, and economic growth by the real income per capita. The findings revealed that economic growth reduces poverty in NUTS-1 regions of Turkey (across the panel), while income inequality increases poverty. When the results were examined on a regional basis, it was found that economic growth reduces poverty in the Western Black Sea, Eastern Black Sea, Eastern Marmara, Aegean, Northeastern Anatolia, and Central Anatolia regions, while it has no impact on the remaining regions. When it comes to income inequality, while it increases poverty in the Mediterranean, East Marmara, and Northeast Anatolia regions, it reduces poverty in the Aegean region and does not have an impact on poverty in the remaining regions.