Social Transfer Spending, Employment Relations and Economic Growth: The Case of Turkey

Yergin H., Torusdağ M.

International Symposium on Economic Thought (ISET), Kocaeli, Turkey, 28 - 30 November 2020, pp.55-56

  • Publication Type: Conference Paper / Summary Text
  • City: Kocaeli
  • Country: Turkey
  • Page Numbers: pp.55-56
  • Van Yüzüncü Yıl University Affiliated: Yes


Since the 1970s, there has been a change in the understanding of the welfare state with the effect of the notion of globalization. Within the framework of the close relationship between poverty and income distribution justice, in addition to the social state understanding, it is possible for the state to directly intervene in the free market economy through social transfer expenditures in order to increase the income distribution and welfare level of the society. It is aimed to struggle poverty by eliminating market failures and ensuring justice in income distribution, and to increase the social welfare level of the society in order to reduce poverty rates. Transfer expenditures consist of expenditures such as debt interest payments, social benefits, subsidy payments, social security payments, participation shares to institutions, fund payments, expropriation and building purchases, tax refunds. Social transfer expenditures include pensions, unemployment insurance, widow's and orphan pensions, scholarships paid to students, etc. examples can be given. Social transfer expenditures cause an increase in total income and an increase in demand. An increase in demand has an indirect effect on the rise in production and employment. Social transfer expenditures also have an effect on growth and development. It can be stated that social transfer expenditures, which create capital accumulation, have an increasing effect on national income and have a positive effect on growth. It can also be said that social transfer expenditures have supportive effects on development in the long term. In the literature, transfer expenditures are defined as the most effective non-inflationary policy in combating inflation. In the fight against inflation, transfer expenditures are reduced in order to reduce aggregate demand, as transfer expenditures can reduce aggregate demand to aggregate supply level in the short run. It is an effective method in combating inflation by increasing the total demand by increasing the total supply by increasing the transfer expenditures and by reducing the total demand. Subsidies can be used to increase the total supply. During periods of persistent inflation, the positive effect of the subsidy disappears and causes an increase in the budget deficit and inflation. Social transfer expenditures are increasing as well as demand for goods and services of individuals. Social transfer expenditures such as unemployment insurance increase the social cost of working and negatively affect individuals' desire to work. Transfer expenditures increase the labor force participation of low-income groups of individuals. In developed countries, transfer expenditures such as unemployment benefit payments and pension payments made to ensure a fair income distribution are higher than other country groups. Social transfer expenditures of countries are important because they are accepted as an indicator of their level of development. Transfer expenditures are also related to employment rate and unemployment. Transfer expenditures affect the demand for labor by affecting supply and demand. Transfer expenditures affect the labor supply with the effect of income and substitution. The state can encourage the increase in the production of goods and services, as well as increase the level of production by increasing consumption by affecting disposable income through transfer expenditures and taxes. Due to the nature of transfer expenditures, they are non-refundable payments made to certain persons or groups and they are expenditures that affect GDP indirectly. In our study is aimed the examine the relation between social transfer spending growth and employment for the 1990-2019 period of Turkey with Hacker-Hatemi-J (2006) causality test.