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Study of Non-linear Relationship between Income Inequality and Economic Growth: A Case of Iran

Author

Listed:
  • Ashrafi, Sakineh

    (Ph.D. Candidate in Economics, University of Tabriz)

  • Behbudi, Davood

    (Professor of Economics, University of Tabriz)

  • Dejpasand, Farhad

    (Associate Professor of Economics, University of Shahid Beheshti)

Abstract

The purpose of this paper is to investigate the effect economic growth to income inequality, both in linear and non-linear specification. Autoregressive distributed lag model (ARDL) approach has been used co-integration method for long run relationships and error correction model (ECM) for short run behavior. The paper has used annual time series data over the period of 1978 up to 2016. Empirically, our baseline estimation and sensitivity analyzes have indicated the inequality is negatively and significantly, associated with economic growth in long run. Our finding is contrast to the Kuznets inverted- U and support for the existence of Kuznets U as well as S- shaped curve in Iran. This paper opens up new direction for policy-making authorities to equalize income distribution and understanding the economic situation in the development process. This paper makes a unique contribution to the literature with reference to Iran, being a pioneer attempt that employs ARDL co-integration approach.

Suggested Citation

  • Ashrafi, Sakineh & Behbudi, Davood & Dejpasand, Farhad, 2018. "Study of Non-linear Relationship between Income Inequality and Economic Growth: A Case of Iran," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 5(3), pages 21-42, October.
    • Handle: RePEc:ris:qjatoe:0117
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    More about this item

    Keywords

    Economic growth; Income distribution; Kuznets curve;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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