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The Effect of Black Market Premium and Asymmetric Inflation and Unemployment on Income Inequality in Iran

Author

Listed:
  • Zaroki, Shahryar

    (Assistant Professor of Economics, Faculty of Economic, University of Mazandaran, Babolsar, Iran)

  • Yousefi Barfurushi, Arman

    (Master of Economics Science, University of Mazandaran, Babolsar, Iran)

  • Mehri Karnami, Yaser

    (Master of Economics Science, University of Mazandaran, Babolsar, Iran)

Abstract

The expansion of the dual exchange system (official and unofficial) increases the concerns about imbalances in macroeconomic variables, particularly, income inequality. Also, Inflation and unemployment are as the macroeconomic variables that can affect income inequality. Accordingly, the present study wants to investigate the role of the black market premium (Dollar) and the asymmetric effect of the unemployment rate and inflation on income inequality. For this purpose, based on the annual data between 1978 and 2017, a non-linear autoregressive distributed lag approach has been used in estimation. The results show that the black market premium in both linear and non-linear forms has a positive (undesirable) effect on income inequality. Unemployment in linear form has a positive (undesirable) effect on income inequality only in the long run. In non-linear form, the decreases in unemployment have a positive (desirable) effect on inequality in the short run. In the long run, both increases and decreases in unemployment have a direct impact on income inequality and the value of the desirable effect of decreases in unemployment is more than the undesirable effect of increases. Thus, the impact of asymmetric unemployment is confirmed on the income inequality in both the short and long run. Inflation in linear form has a direct effect on income inequality, but in non-linear form, both in the short and long run, decreases in inflation have a positive (desirable) effect on inequality. Hence, inflation also has an asymmetric effect on income inequality. Another finding is that the desirable effect of decreases in unemployment on income inequality is more than the desired effect of decreases in inflation on income inequality

Suggested Citation

  • Zaroki, Shahryar & Yousefi Barfurushi, Arman & Mehri Karnami, Yaser, 2020. "The Effect of Black Market Premium and Asymmetric Inflation and Unemployment on Income Inequality in Iran," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 7(1), pages 117-148, May.
    • Handle: RePEc:ris:qjatoe:0180
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    Citations

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    Cited by:

    1. Sadeghi Amroabadi, Behrouz, 2022. "Analyzing the Asymmetric Cumulative Effects of Rentier State on Income Inequality in Mena Countries," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 9(3), pages 113-146, December.

    More about this item

    Keywords

    Black Market Premium; Unemployment; Inflation; Income Inequality;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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