Poverty and income distribution incidence of the COVID-19 outbreak: investigating socially responsible policy alternatives for Turkey

ABSTRACT

To counterbalance the deep systemic global crisis triggered by the COVID-19, many countries introduced a vast arsenal of fiscal policy instruments coupled with monetary accommodation. Yet, Turkey’s response had almost exclusively relied on credit expansion and loan guarantees while minimizing the role of fiscal policy. Within that context, this article has three interrelated objectives. Firstly, we evaluate the effects of the crisis and the implemented policies on poverty and income distribution. Second, we measure the macroeconomic impacts of COVID-19 on the Turkish economy through a general equilibrium model. We find that these policies had a limited impact on reducing crisis-induced poverty. Finally, we propose alternatives to mitigate the effects of the COVID-19 crisis, which are compatible with fiscal constraints. Our results suggest that by pursuing a targeted fiscal income transfer programme covering wage earners and small-sized enterprises, Turkey could have achieved a more egalitarian and effective response to the Covid-19 crisis.

KEYWORDS:

• Covid 19 crisis
• Turkey
• socially relevant policy
• labour
• applied general equilibrium
• income distribution

Supplementary material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/14683857.2022.2087852

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. https://blogs.imf.org/2020/10/14/fiscal-policy-for-an-unprecedented-crisis/.

2. Aygün et al. (2022) follow a similar practice.

3. Table B1 in Online Supplemental Material B presents official poverty and inequality statistics from TURKSTAT for and our estimates for 2018, 2019 and 2020. Table B2 in Online Supplemental Material B shows changes in household incomes by decile. Figure B1 shows the distributional changes in wage incomes.

4. This estimated decline in disposable incomes is significantly more than our estimate in the previous section. The discrepancy is partly due to estimates in this stage do not incorporate actual policy interventions, whereas we incorporated the effect of these policies in the previous section. Policy evaluation presented in the previous section is a static estimate of direct decline in disposable incomes and do not take into account the indirect effects of the actual decline in incomes.

5. 3.5 million workers are reported to be benefitted from this program (TRT 2020b).

Additional information

Funding

This work was supported by The Scientific And Technological Research Council Of Turk (Tübitak-SOBAG) under Project no 120K541

Notes on contributors

Hasan Tekgüç

Hasan Tekgüç obtained his in Economics from University of Massachusetts Amherst in 2010. In his studies, he focuses on calculation of alternative poverty measures, impact evaluation of social assistance on poverty and inequality, and the distribution of education investment and the impact of Syrian migrants on natives’ employment in Turkey. He also studies the price transmission process in various animal product markets.

Ezgi B. Ünsal

Ezgi B. Ünsal finished her at SOAS, University of London. Dr Ünsal’s work focuses on development macroeconomics, global political economy and social policy.

Erinc Yeldan

Erinc Yeldan received his from University of Minnesota, USA, in 1988. He currently serves as Professor of Economics and Dean at Kadir Has University. He is one of the executive directors of the International Development Economics Associates (IDEAs), New Delhi, and a member-elect of the International Resource Panel of the UN Environment Programme (UNEP). He is also a member-elect of the Science Academy (Bilim Akademisi) in Turkey. Dr Yeldan’s work focuses on development macroeconomics, economics of climate change, and on empirical, dynamic general equilibrium models