Spatial analysis of the effect of financial decentralization on poverty: a study of Iranian provinces

Poverty reduction is one of the tasks that governments are required to perform, along with other key tasks to achieve social welfare, such as the optimal allocation of resources, income distribution, economic growth and stability, and the like. But whether government poverty reduction policies are better to be implemented by the national or provincial government and how the implementation of poverty reduction policies in one province affects another province, needs to be studied. Therefore, in the present study, along with other variables affecting poverty, the spatial effects of financial decentralization indicators on poverty for the provinces of Iran during the period 2006-2016 are examined. The results of the study indicate that financial decentralization of expenditures and financial decentralization of income have negative and significant effects on poverty, and therefore it is better that the task of poverty reduction is performed by provincial governments. The fact that the financial decentralization rate of expenditures is higher than that of income indicates that the implementation of a policy of financial decentralization of expenditures will be able to reduce poverty more effectively. In addition, the results of the present study confirm the positive effects of spatial proximity for the provinces of the country. This means that increasing poverty in one province increases poverty in neighboring provinces.