Intertemporal CGE Analysis of Income Distribution in Turkey

This study focuses on the effects of public policies on the size distribution of income in Turkey. To this end, an intertemporal dynamic equilibrium model with heterogeneous agents in a small open economy framework is constructed. This study serves several extensions to the literature via its algebraic structure and the calibration process in which various micro-level data sets are utilized. The results reveal that, in line with the previous findings of the literature, increasing budget allocations to unilateral social transfer programs has no significant effect on the size distribution of income and has adverse effects on the labor market decisions of relatively poor laborers. On the contrary, subsidizing the cost of labor has positive impacts on labor supplies and the size distribution of income improves in favor of relatively poor households.