Analysis of income inequality in terms of fiscal policy instruments and institutional quality factors in Turkey and suggested solutions

The income inequality which occurs when the economic units take their margins different from each other is an important component which constitutes the basic aim and policies of all countries regardless of their level of development. Income inequality is an important issue that needs to be addressed as it brings along social and economic problems. States are developing various policies to solve this problem, and at the top of them are fiscal policy implementations. The public sector is trying to provide justice in the distribution of income by ensuring redistribution of income with taxes which is one of the fiscal policy instruments and public expenditures. In addition to being influenced by various factors in the emergence of income inequality in a country, the institutional structure of the country also has great precaution. In the light of this view, it is expected that income inequality will be lower in countries whose institutional structure is strong; in other words, institutional quality level is high. In this study, in Turkey between the years of 1990-2016, the effects of taxation, public expenditure and public debt as the instruments of fiscal policy and institutional quality factor have been analyzed by Least Squares Method (OLS). As a result, increases in public expenditures, tax and institutional quality levels have reduced income disparity, while an increase in public borrowing has resulted in an increase in income distribution inequality.