ABSTRACT
Individual income distribution and associated social policies are commonly studied topics both for developed and developing countries. However, the relationship between functional and personal income distribution, the consequences for inequality and their development over time are not well researched in many cases like Turkey. While labour share in the country has rapidly fallen since 1990s with a slight recovery in mid-2000s, the individual distribution is claimed to be improving by official estimations over the entire period. The study first aims to examine how primary and secondary income distributions affect each other. Then, by looking at who receives labor and non-labor factor incomes, and by estimating Gini coefficients for each income category, the impact of functional income on overall inequality is analyzed in the paper. According to our findings, over the period under consideration, interest income and non-agricultural entrepreneurial income are concentrated more in the hands of the richest individuals. The effect of changes in the labor income is less clear in Turkey since it is a major source for all income brackets. In addition, the rise in the shares of interest and real estate incomes most adversely affect the individual income distribution, and heighten economic inequality
Keywords : functional income distribution, individual income distribution, factor incomes, labour, capital, inequality
