The Effect of Public Social Transfer Expenditures on Personal Income Distribution

Abstract

Ensuring a fair distribution of income is among the aims of modern public finance today. The state makes use of public expenditure to an effective attainment of this goal. This study examines the impact of the public social transfer expenditures on personal income distribution in Turkey for 1987-2016. For this purpose, time series analysis methods, namely Maki (2012) cointegration test with multiple structural break, Fully Modified Least Squares (FMOLS) test and Hatemi-J (2012) asymmetric causality test were used. According to the findings, a long-term cointegration relationship between state's social transfer expenditures and the Gini coefficient which is an indicator of the justice of personal income distribution, has been determined. A further finding was that, when public social transfer expenditures increase by 1%, the Gini coefficient decreases by -0.505%.