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Indirect Taxes, Social Expenditures and Poverty:What Linkage?

Author

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  • Fatih KARANFIL

    (EconomiX-CNRS and University of Paris Ouest, Faculty of Economics, Management, Mathematics and Computer Science, Department of Economics)

  • Ata OZKAYA

    (Galatasaray University, Faculty of Economics and Administrative Sciences, Department of Economics,)

Abstract

We shed light into the empirical relationship between social expenditures and poverty for Turkey over the period 1975-2005. We estimate first a series for the headcount index which is not exactly known due to measurement problems in countries such as Turkey, where the degree of unrecorded economy is higher. For this purpose, employing Kalman filter technique, we use social expenditures, public income and interest payments in our model. Then, cointegration analysis is used to investigate the relationship between the estimated headcount index and the share of indirect taxes in the total tax income. The study concludes that: first, the portion of poor population increases and it reaches 17.6 percent in 2005; second, social expenditures increase thanks to the rise in public income which is realized by the relative increase in the share of indirect taxes in total tax revenues. This policy impedes in the long run poverty reduction; and third, the increase in this share leads to a higher headcount index.

Suggested Citation

  • Fatih KARANFIL & Ata OZKAYA, 2013. "Indirect Taxes, Social Expenditures and Poverty:What Linkage?," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 13(3), pages 337-350.
    • Handle: RePEc:ege:journl:v:13:y:2013:i:3:p:337-350
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    References listed on IDEAS

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    Cited by:

    1. Sanjeev Gupta & João Tovar Jalles, 2020. "Tax Revenue Reforms and Income Distribution in Developing Countries," Working Papers REM 2020/0137, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    2. Bagis, Bilal & Yumurtaci, Aynur, 2020. "Welfare Perceptions of the Youth: A Turkish Case Study," GLO Discussion Paper Series 671, Global Labor Organization (GLO).
    3. Gupta, Sanjeev & Jalles, João Tovar, 2022. "Do tax reforms affect income distribution? Evidence from developing countries," Economic Modelling, Elsevier, vol. 110(C).

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    More about this item

    Keywords

    Poverty; taxation; kalman filter; Turkey;
    All these keywords.

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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