The Relationship Between Trade Openness and Income Distribution in Turkish Economy: Toda-Yamamoto Causality Test Approach

Abstract

How the income, which expresses the value obtained by the factor owners as a result of the production process, is distributed among individuals is important for socio-economic development as well as how it is obtained. Because income distribution is affected by many macroeconomic variables and affects economies of the countries. According to the Stolper-Samuelson Theorem, which explains the effects of free foreign trade on income distribution, the trade liberalization process reveals a trend of equalization in income distribution. The main purpose of the current study is to test whether free trade yields a synchronized trend in the distribution of income for Turkey within the framework of the Stolper-Samuelson theorem. In this study, commercial openness and income distribution inequality relationship was analyzed using data for years 1987-2018 in Turkey by Toda-Yamamoto causality. As a result of the econometric analysis, it was found out that the determination of a one-way causality from the real commercial openness to the income distribution inequality does not reveal a tendency to equalization in the income distribution, as opposed to what is suggested in the Stolper-Samuelson Theorem.