Toward a green income support policy: investigating social and fiscal alternatives for Turkey

Abstract

AbstractThe limited success of employment-based social protection measures under the diverging patterns of post-COVID-19 recovery rekindled interest in a social policy framework known as the Basic Income (BI) support. We test the potential of the BI program using five alternative scenarios ranging from households with income less than half of median income to all adults with estimates of their respective fiscal costs. We then employ an applied general equilibrium model to analyze the economy-wide effects and welfare implications for Turkey in the long run through 2030. We evaluate the macroeconomic and welfare effects of both a business-as-usual fiscal program and an alternative (green BI scenario) comprising of (i) carbon tax levied on the fossil fuel producing industry; (ii) corporate income taxation policy reform that aims at expanding the revenue base and consolidation of the fiscal space of the government; and (iii) restructuring of public consumption expenditures by introducing rationality and efficiency in the structure of fiscal expenditures. Our model solutions reveal that a green BI scenario not only achieves a higher GDP and welfare in the medium to long run but also helps Turkey to reduce its carbon emissions in line with the global policy challenges of a green recovery.