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Analyzing the Causal Relationships between Economic Growth, Income Inequality, and Transmission Channels: New Empirical Evidences from Iran

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  • Hajamini, Mehdi

    (Department of Economics, Yazd University)

Abstract

This paper investigates causal relations between economic growth, income inequality, and transmission channels during the period 1972 to 2016. These channels include saving rate, investment rate, redistribution policies, human capital, and conspicuous consumption. There is no strong evidence that supports uni-directional or bi-directional causality. In addition, some of the transmission channels lead to improvement of economic growth and equality simultaneously. It concludes that the rapid economic growth and the income inequality alleviation are not necessary conflicting objectives. Hence, strategy of “Redistribution with growth” is a more effective and perhaps politically more acceptable approach than “growth before redistribution” or “redistribution before growth” strategies.

Suggested Citation

  • Hajamini, Mehdi, 2020. "Analyzing the Causal Relationships between Economic Growth, Income Inequality, and Transmission Channels: New Empirical Evidences from Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 15(3), pages 313-342, July.
    • Handle: RePEc:mbr:jmonec:v:15:y:2020:i:3:p:313-342
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    More about this item

    Keywords

    Economic Growth; Income Inequality; Transmission Channels; Causality;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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