A Household Level Examination of Regional Income Disparity in Turkey

Abstract

The purpose of this paper is to examine regional income disparity in the urban areas of Turkey during the 1994 - 2003 period. Making use of micro-data, we first explore the association of various household-level characteristics with regional disparity. In accordance with expectations, simulation exercises we carry out reveal that unfavorable demographic characteristics and higher dependency ratios contribute to regional disparity in household incomes. However, we argue that macroeconomic factors have made a larger impact on trends related to income inequality during a decade that saw the Turkish economy go through several turbulent periods. Finally, a decomposition analysis by income source identifies ‘non-labor income’ as the component that generates much of regional disparity due to its rather unequal distribution both within and across the regions.