The Relationship Between Financial Development and Income Inequality: A Fourier Approach in the Case of Türkiye

While financial development is recognized as the driving force of economic growth, income inequality is a significant concern regarding social justice and sustainable development. The relationship between these two concepts can directly affect countries' economic policies and social balances. Therefore, the deepening and expansion of financial systems may create injustice in income distribution, but it also has the potential to reduce inequalities when appropriately managed. This study aims to determine the long-run impact of financial development on income inequality in Türkiye. For this purpose, the data set for the variables covers the period 1991-2022 and consists of annual observations. Income inequality (Gini coefficient) is used as the dependent variable, and the financial development index is used as the independent variable. In the study, the stationarity of the variables was tested with the Fourier unit root test (FKPSS) and KPSS unit root test. After the determination that the variables were not stationary at their level values, the Fourier cointegration test was used to test the existence of a long-run relationship between the variables. The study found that there is a cointegration relationship between financial development and income inequality in Türkiye. After establishing the co-integration relationship, our long-run DOLS estimation revealed a statistically significant negative relationship between financial development and income inequality at a 1% confidence level. The key conclusion drawn from this is that increases in financial development lead to reduced income inequality. This result underscores the potential impact of increasing financial development on reducing income inequality, and the importance of efforts and policies.

Authors

Institutions

Publication Details

Journal
MANAS Sosyal Araştırmalar Dergisi
Published
2025-10-03
DOI
https://doi.org/10.33206/mjss.1512863
Primary Topic
Economic Theory and Policy
Type
article
Field-Weighted Citation Impact
0.00
Controls
|||
ALL TIME
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
article

The Relationship Between Financial Development and Income Inequality: A Fourier Approach in the Case of Türkiye

İbrahim Karaaslan
MANAS Sosyal Araştırmalar Dergisi
Economic Theory and Policy
article

The Relationship Between Financial Development and Income Inequality: A Fourier Approach in the Case of Türkiye

İbrahim Karaaslan
article en

Abstract

While financial development is recognized as the driving force of economic growth, income inequality is a significant concern regarding social justice and sustainable development. The relationship between these two concepts can directly affect countries' economic policies and social balances. Therefore, the deepening and expansion of financial systems may create injustice in income distribution, but it also has the potential to reduce inequalities when appropriately managed. This study aims to determine the long-run impact of financial development on income inequality in Türkiye. For this purpose, the data set for the variables covers the period 1991-2022 and consists of annual observations. Income inequality (Gini coefficient) is used as the dependent variable, and the financial development index is used as the independent variable. In the study, the stationarity of the variables was tested with the Fourier unit root test (FKPSS) and KPSS unit root test. After the determination that the variables were not stationary at their level values, the Fourier cointegration test was used to test the existence of a long-run relationship between the variables. The study found that there is a cointegration relationship between financial development and income inequality in Türkiye. After establishing the co-integration relationship, our long-run DOLS estimation revealed a statistically significant negative relationship between financial development and income inequality at a 1% confidence level. The key conclusion drawn from this is that increases in financial development lead to reduced income inequality. This result underscores the potential impact of increasing financial development on reducing income inequality, and the importance of efforts and policies.

MANAS Sosyal Araştırmalar DergisiVol. 14(4)
Gümüşhane University (TR)
Openalex Percentile: Top 56%
Economic Theory and Policy
AI Navigator

Ask Laika to Summarize, Analyze, and Connect papers live on the map.

Summarize Papers & Methodologies

Extract key findings, datasets, and comparative methods across publications.

Benchmark Rankings & Visual Analytics

Rank top research institutions, authors, funders, topics, and journals by Field-Weighted Citation Impact (FWCI) and paper volume with instant charts.

Connect Distant Disciplines

Bridge topological clusters on the map to find hidden collaborative intersections.