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The effect of the global financial crisis on household income, inequality and poverty in Turkey

Using a nationally representative large scale micro data, we investigate the effect of the Global Financial Crisis (GFC) on household income, inequality and poverty in Turkey. In assessing the impact of the GFC, we take 2007 (pre-crisis year) as the benchmark and compare 2009 to 2007 and to 2011 (post-crisis period). We find that (real) household disposable income drops by 3.6 percent from 2007 to 2009, but that the decline in equivalized income is lower at 1.2 percent. Income inequality decreases over the crisis period, so does the absolute poverty rate, though quite marginally. Changes in household size and composition, household labor supply and non-contributory transfers help mitigate the negative effects of the GFC. The period following the crisis is marked by increases in both disposable income and equivalized income, and a sizeable drop in the poverty rate though we also observe an increase in income inequality.