The paper provides a critical review of income inequality of the Turkish economy. It also contributes to the literature by emphasizing the link between labor income share, markup and income inequality. As a structural fact, Turkey has higher income inequality as compared to European countries. Though there was a minimal decline in the first decade of the 2000s, inequality has risen again in Turkey. The paper examines the determinants and factors lying behind income inequality in Turkey. First, factors are classified as distributive and redistributive determinants related to income inequality, then factors are analyzed with regard to correlation and efficiency for Turkey. To grasp and comprehend the dynamics of income inequality, European countries have taken as complementary examples. As well as usage in general studies, the Palma ratio was also used to analyze the degree of income inequality in Turkey. Since the elasticity of substitution between labor and capital is lower than that in the Turkish economy, through capital deepening since the 1960s, labor income share increased and income inequality decreased accordingly. It seems that low labor income share is the main reason of high-level income inequality in Turkey. In terms of redistributive policies, tax policy is not effective and even worsening income inequality in Turkey. Lastly, Piketty's r-g hypothesis was explored whether it is significant for the measurement of income inequality in Turkey or not. It is concluded that factor shares are the main reason of income inequality in Turkey.
Key words: Income Inequality, Labor Income Share, Palma Ratio. JEL Codes: N30, D30 Article Language: EnglishTurkish
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