Structural changes and functional distribution of income: Evidence from a developing country

The purpose of this chapter is to investigate the effects of structural adjustment policies and greater openness on income distribution examining the functional distribution of income in Turkey. For this purpose we employ a Leontief type input-output methodology, and divide total income by income groups such as wage and non-wage earners. Relying on the changing structure of relationship among industries in response to different macroeconomic policies, we examine how these macroeconomic policy changes affect the functional distribution between wage-earners and non-wage earners. We derive an income-multiplier matrix for different years basing on all available input-output tables, and we interpret the likely consequences of income and expenditure - inducement policies on income distribution and the income generation capability of the economy. According to our results, the income generation capability of the Turkish economy appears to have continuously declined both during the periods of the 1980s and at the beginning of the 1990s. Besides, the income generation process and policies with the economic structures of the Turkish economy inevitable create income inequalities.