An Analysis of Inequality in Iran's Provinces (Orientations and Outcomes)

Baseri, Bijan

doi:10.22054/ijer.2022.66260.1073

Obtaining a ranking by the journal of education leadership research from the Ministry of Science, Research and Technology

Obtaining the "A" rating by the Quranic Knowledge Research Journal from the Ministry of Science, Research and Technology

Consultative meeting of officials of scientific journals of Allameh Tabatabai University

The scientific evaluation results of the journals of Allameh Tabataba'i University in the year 1401; 18 titles succeeded in obtaining an "A" rank.

	An Analysis of Inequality in Iran's Provinces (Orientations and Outcomes)
پژوهش‌های اقتصادی ایران
Article 5, Volume 28, Issue 94, April 2023, Pages 175-224 PDF (1.39 M)
Document Type: Research Paper
DOI: 10.22054/ijer.2022.66260.1073
Author
Bijan Baseri^*
Assistant Professor, Department of Economics, Islamic Azad University, Central Tehran Branch, Tehran, Iran
Abstract
In this paper, attempts are made to empirically examine inequality in Iran which has hindered the government to achieve a balanced provincial socio-economic development. Income inequality affects economic growth sustainability through certain channels such as different saving rates of people, incentives to work hard, political instability and other factors as a whole. The effectiveness of government policies to address a balanced and an equitable development needs of each province depends mainly on quality of existing institutions, individual participation and their capabilities to contribute to development effort in each province. Inequality in provinces is partly due to regional inequality which in turn stems from unequitable provincial privilege to some resources, production specializations, the degree of centralization and unequitable budget allocation. In addition, the orientation and expenditure allocations mechanism pursued by government, if not rightly targeted, may affect spatial planning and economic growth which ultimately brings about inequality. In the present study, we examine how government policies have contributed (if any) to achieve the balanced growth objectives in order to decrease the existing provincial inequality gap. Based on Theil’s and Williamsons indices, we estimated inequality coefficient in Iran’s provinces for the period of 2000 to 2019. The findings in this research show that the policy measures adopted by government in some provinces, have had mixed consequences. For some provinces it has contained and reduced the inequality and for some other province it has worsened the inequality gap over the same period. Based on Theil’s Index, inequality coefficient has increased in provinces such as Tehran and some other relatively more developed provinces and for less developed provinces the index has decreased. Government budget expenditures disbursed among various provinces have had a bearing on inequality through the provision of public physical investment, promoting education provision, expanding health care services and capacity building enhancement. Introduction Income inequality affects economic growth performance and create disparities among regions in a country. The income inequality gap among regions contribute to adverse outcomes resulting from economic growth. There are different arguments in this regard. One categories of views emphasize on negative aspects of income inequality and economic growth (Alesina and Rodrik (1994), Persson and Tabellini (1994)) Li and Zou (1998), Amos (1988), Barro (2000). The other one emphasizes on positive aspects of income inequality. The first view argues that income inequality encourages economic growth, because of effectiveness brought about by incentives, efforts made, skill level of individuals and household’s capabilities. It seems that part of inequality stems from regional disparities and non performing spatial policies. Spatial inequality is the result of economic and regional policy measures adopted by government. Some contributing factors to inequality originate in leading economic sectors, and some other factor have roots in government policies and in growth leading provinces. From theoretical point of view, income inequality stems from political instability and income distribution channel affected by higher progressive income tax rates in order to finance regional equalization needs. (Alesina and Rodrik, 1994,Galor,2006). It’s obvious that regions undergoing economic development process with a time lag, will benefit from the policy experienced by others. Kuznets (1955) determined the mutual relation between inequality and economic growth in inverted U shape in the state of economic development and Williamson (1965) Generalized it to regions. Barrios and Strobl (2009), Lessmann (2014), Lessmann and Seidel (2017), Neves (2016) concludes that in the higher phase of economic development the Kuznets inverted U curve will take N shape. The effect of income inequality on economic growth is different due to the level of economic development, government policies, and region’s capabilities. Methods and Material Regional Inequality is estimated by different methods. Williamson (1955) and Theil’s (1965) indices selected to estimate regional income inequalities in Iran’s provinces based on following relationship: In which, CV_wis Williamson index and its quantity takes a range between 0 and ∞. y_i is province per capita income. is national average per capita income. p_iis province population and p is total population. Williamsons index measures inequalities using population shares of each province. we used the models for two specific periods,2000 and 2019. Data gathered from SCI (Statistical center of Iran) and regional statistics. The Theil’s indices have been estimated by following equations (Cowell,2009): in which, n is number of provinces , x_i is province per capita income, stands for national per capita, is province income share, log shows variables in logarithm form. Computation is made using current prices. Share of each province in total government expenditure is taken as an indicator of resources allocation mechanism in order to estimate inequality and changes their in. Results and Discussion The result, based on Theil’s indices is shown in table below: Theil’s Inequality indices calculated for Iran, in2000 and 2019 Provinces Province-wise disbursement of Government Expenditure changes Theils Indices in : 2000 2019 Arak 1.82 -0.244 0.048 0.036 Gilan 3.56 -0.435 0.052 0.029 Mazandaran 4.22 -0.021 0.038 0.037 East Azarbyjan 4.81 0.313 0.039 0.051 west Azarbyjan 3.67 0.167 0.032 0.037 Kermanshah 3.19 -0.233 0.033 0.026 Khuzestan 6.99 -0.397 0.125 0.076 Fars 7.26 -0.242 0.074 0.056 Kerman 4.59 0.082 0.052 0.056 Khorasan Razavi 8.16 -0.424 0.104 0.060 Isfahan 5.42 -0.240 0.094 0.071 Hormozgan 3.04 -0.206 0.059 0.047 Sistan and Baluchistan 4.07 -0.224 0.033 0.026 Kurdistan 2.54 -0.061 0.020 0.018 Hamadan 2.66 0.078 0.022 0.023 Lorestan 2.63 0.065 0.020 0.021 Ilam 1.47 -0.263 0.016 0.012 Zanjan 1.79 0.096 0.024 0.026 Chaharmahal and Bakhteyari 1.79 -0.022 0.015 0.015 Theil’s Inequality indices calculated for Iran, in2000 and 2019 Provinces Province-wise disbursement of Government Expenditure changes Theils Indices in : 2000 2019 Kohgiluyeh and Boyerahmad 1.47 -0.065 0.013 0.012 Semnan 1.48 -0.379 0.027 0.017 Yazd 1.95 -0.080 0.039 0.036 Bushehr 2.13 -0.317 0.062 0.042 Tehran 6.68 0.641 0.097 0.160 Ardabil 1.88 -0.011 0.020 0.019 Qom 1.80 -0.361 0.021 0.014 Qazvin 1.71 -0.482 0.054 0.028 Golestan 2.35 0.033 0.020 0.020 Khorasan shomali 1.57 2.368 0.003 0.011 Khorasan Jonobi 1.66 1.024 0.006 0.013 Alborz 1.65 0.172 0.034 0.039 Total 100 -0.124 1.296 1.135 Reference: Author’s calculation Based on our findings, the inequality between two periods under study (2000 - 2019) has decreased from 1.296 to 1.136. In some province Theil’s coefficient of inequality has increased (e.g., East Azarbyjan, west Azarbyjan, Kerman, Hamadan, Lorestan, Zanjan, Tehran, Golestan, Khorasan Shomali and Khorasan Jonobi). Tehran has experienced minimum inequality changes between two periods. But Qazvin, Gilan and Khorasan Razavi have experienced maximum changes in inequality index over the same period compared to other provinces Conclusion In Iran, Government regional resource allocation through budget provisions has affected provinces differently in terms of inequality over the specified period. Each current and capital government expenditure allocated to provinces, has affected them differently due to privilege bargaining power enjoyed by some provinces and other relevant issues involved. Endogenous factors such as local and regional investment, local incentives, entrepreneurship, stability and managerial capacities as complementary elements have played an important role in decreasing regional inequality.
Keywords
Provinces Inequality; Theil and Williamson Index; Government Policies

References
Achten, S. & Lessmann, C. (2020). Spatial inequality, geography and economic activity. World development, 136, 105114. Adama, O. (2012). Urban governance and spatial inequality in service delivery: a case study of solid waste management in Abuja, Nigeria. Waste Management & Research, 30(9), 991-998. Alden, J. & Morgan, R. (1974). Regional planning: a comprehensive view. John Wiley & Sons, Publication Leonard Hill Books, New York Alesina, A. & Perotti, R. (1996). Income distribution, political instability, and investment. European economic review, 40(6), 1203-1228. Alesina, A. & Rodrik, D. (1994). Distributive politics and economic growth. The quarterly journal of economics, 109(2), 465-490. Alvaredo, F., Chancel, L., Piketty, T., Saez, E. & Zucman, G. (Eds. ). (2018). World inequality report 2018. Belknap Press. Arrow, K. J. (1962). The economic implications of learning by doing. The review of economic studies, 29(3), 155-173. Atkinson, A. B. (1970). On the measurement of inequality. Journal of economic theory, 2(3), 244-263. Azzoni, C. R. (2001). Economic growth and regional income inequality in Brazil. The annals of regional science, 35, 133-152. https://doi.org/10.1007/s001680000038 Barro, R. J. (2000). Inequality and Growth in a Panel of Countries. Journal of economic growth, 5-32. Becker, G. S. & Chiswick, B. R. (1966). Education and the Distribution of Earnings. The American Economic Review, 56(1/2), 358-369. Becker, G. S. & Chiswick, B. R. (1966). Education and the Distribution of Earnings. The American Economic Review, 56(1/2), 358-369. Bourguignon, F. & Morrisson, C. (2002). Inequality among world citizens: 1820–1992. American economic review, 92(4), 727-744. DOI: 10. 1257/00028280260344443 Brighouse, H. & Swift, A. 2009, Educational equality versus educational adequacy: A critique of Anderson and Satz, Journal of applied philosophy, 2009 - Wiley Online Library Collier, P. (1998). Social capital and poverty. World Bank, Social Development Family, Environmentally and Socially Sustainable Development Network. Conceição, P. & Ferreira, P. (2000). The young person's guide to the Theil index: Suggesting intuitive interpretations and exploring analytical applications. Cowell, F. A. & Van Kerm, P. (2015). Wealth inequality: A survey. London. Dabla-Norris, M. E., Kochhar, M. K., Suphaphiphat, M. N., Ricka, M. F. & Tsounta, M. E. (2015). Causes and consequences of income inequality: A global perspective. Prepared by with contributions from Preya Sharma and Veronique Salins, Authorized for distribution by Siddharh Tiwari, International Monetary Fund. Dabla-Norris, M. E., Kochhar, M. K., Suphaphiphat, M. N., Ricka, M. F. & Tsounta, M. E. (2015). Causes and consequences of income inequality: A global perspective. International Monetary Fund. Davidson, P. (2010). Behavioral economists should make a turn and learn from Keynes and Post Keynesian economics. Journal of Post Keynesian Economics, 33(2), 251-254., published by: Taylor & Francis, Ltd Fan, C. C. (1997). Uneven development and beyond: regional development theory in post‐Mao China. International Journal of Urban and Regional Research, 21(4), 620-639. https://doi.org/10.1111/1468-2427. 00105 Fujita, M. & Hu, D. (2001). Regional disparity in China 1985–1994: The effects of globalization and economic liberalization. The annals of regional science, 35, 3-37. Fujita, M. & Hu, D. (2001). Regional disparity in China 1985–1994: The effects of globalization and economic liberalization. The annals of regional science, 35, 3-37. Galbraith, J. K. (2018). Sparse, inconsistent and unreliable: Tax records and the world inequality report 2018. Development and Change, 50(2), 329-346. Galor, O. & Moav, O. (2004). Ability biased technological transition, wage inequality and growth, International Library of Critical. scholar. archive. org. Galor, O. & Mountford, A. (2006). Trade and the great divergence: the family connection. American Economic Review, 96(2), 299-303. Garbinti, B., Goupille-Lebret, J. & Piketty, T. (2018). Income inequality in France, 1900–2014: evidence from distributional national accounts (DINA). Journal of Public Economics, 162, 63-77. https://doi.org/10.1016/j. jpubeco.2018.01.012 Gezici, F. & Hewings, G. J. (2004). Regional convergence and the economic performance of peripheral areas in Turkey. Review of Urban & Regional Development Studies, 16(2), 113-132. https://doi.org/10.1111/j.1467-940X.2004.00082. x Gezici, F. & Hewings, G. J. (2004). Review of Urban & Regional. Wiley Online Library. Gezici, F. & Hewings, G. J. (2007). Spatial analysis of regional inequalities in Turkey. European Planning Studies, 15(3), 383-403. https://doi.org/10.1080/09654310601017091 Gupta, M. S., & Abed, M. G. T. (2002). Governance, corruption, and economic performance. International Monetary Fund.‏ Gupta, S., Davoodi, H. & Alonso-Terme, R. (2002). Does corruption affect income inequality and poverty?. Economics of governance, 3, 23-45. https://doi.org/10.1007/s101010100039 Habibi, S., Hajimoladarvish, N., Raghfar, H. (2021). Subjective poverty influences on labor productivity in Iran, Quarterly Journal of Applied Economics, 8(1), 165-184[In Persion]. Havas, A. (2003). Socio-economic and developmental needs: focus of foresight programmes. KTK/IE Discussion Papers, (2003/13). Heise, A. (2019). Post-Keynesian Economics-Challenging the Neo-Classical Mainstream, University of Hamburg, Department of Socioeconomics, Arne. Heise@wiso. Uni-hamburg. Index, C. P. (2018). Corruption perception index. Transparancy International. International Monetary Fund. (2021). Regional Economic Outlook, October 2021, Middle East and Central Asia: Trade-Offs Today for Transformation Tomorrow. International Monetary Fund. Jabarri, H. (2005), Poverty Reduction with Social Based Approach, Social Welfare Review. 5(18). [In Persion] Jahangard, E. & Shishvani M. (2014), An Examination of Human Capital effects on Economic Growth in Iran, Applied economics, 4(13), 37-48. DOR: 20.1001.1.22516212.1393.4.0.16.3 [In persion] Jones, C. I. (2019). Paul Romer: Ideas, nonrivalry, and endogenous growth. The Scandinavian Journal of Economics, 121(3), 859-883. Jones, C. I. & Tonetti, C. (2020). Nonrivalry and the Economics of Data. American Economic Review, 110(9), 2819-58. Kalenborn, C. & Lessmann, C. (2014). Regional Income Inequality lowers Life Satisfaction: Evidence from OECD Countries. Kanbur, R. & Venables, T. (2005). Introduction: Spatial inequality and development. Journal of Economic Geography, 5(1), 1-2. https://doi.org/10.1093/jnlecg/lbh059 Khanzadi A., Ghaderi E. & Najafi S. B., (2017), Equality in opportunity and reduction of inequality in Iran, First International summit in Sustaiable Rigional Development in Iran, Kordestan University. [In Persion] Lazear, E. P. & Rosen, S. (1981). Rank-order tournaments as optimum labor contracts. Journal of political Economy, 89(5), 841-864. Lessmann, C. & Seidel, A. (2017). Regional inequality, convergence, and its determinants–A view from outer space. European Economic Review, 92, 110-132. Li, H. & Zou, H. F. (1998). Income inequality is not harmful for growth: theory and evidence. Review of development economics, 2(3), 318-334. Lucas Jr, R. E. (1988). On the mechanics of economic development. Journal of monetary economics, 22(1), 3-42. Magali, D. & Abigail McKnight, (2019), Understanding the relationship between inequalities and poverty: a review of dynamic mechanisms case, paper 217/LIP paper 7 ISSN 1460-5023, LSE. Mincer, J. (1958). Investment in human capital and personal income distribution. Journal of political economy, 66(4), 281-302. Mincer, J. (1985). Intercountry comparisons of labor force trends and of related developments: an overview. Journal of labor economics, 3(1, Part 2), S1-S32. Momeni, F., Dashtbani, S. & Banoee A., (2017), The role of agriculture in economic equiblirium of rural-urban in Iran, Journal of Spatal and Rural Development, 6(22), 17-46. [In Persion] Nissan, E. & Carter, G. (2005). Decomposition of regional metropolitan and nonmetropolitan income inequality. Journal of Economics and Finance, 29(1), 73-84. Neves, P. C., Afonso, Ó. & Silva, S. T. (2016). A meta-analytic reassessment of the effects of inequality on growth. World Development, 78, 386-400. North, D. C. (2005). Understanding the process of economic change. Princeton university press. Østby, G. (2008). Polarization, horizontal inequalities and violent civil conflict. Journal of Peace Research, 45(2), 143-162. Palley, T. (1996). Post Keynesian economics: debt, distribution and the macro economy. Springer. Persson, T. & Tabellini, G. (1994). Does centralization increase the size of government? European Economic Review, 38(3-4), 765-773. Piketty, T. (2014), Capital in 21th Century, Harvard University Press. Puglisi, M. & Marvin, S. (2002). Developing urban and regional foresight: exploring capacities and identifying needs in the North West. Futures, 34(8), 761-777. https://doi.org/10.1016/S0016-3287(02)00019-8 Raghfar, H. & Yosfvand, F. (2009). Child poverty in Tehran city, majless and rahbord, 23(88). 5-34. Dor: 20.1001.1.17356768.1396.17.3.1.5. [In Persion] Rawls, J. (2014). A Justice Theory, Translated by Nori, Morteza, Nashr Markas, Tehran.[In Persion] Rey, Sergio J. )2001(. Spatial Analysis of Regional Income Inequality. Munich: University Library of Munich, Available online: https://ideas. Repec. Org/p/wpa/wuwpur/0110002. Html (accessed on 20 October 2021). Robbins, L. (1932). The nature and significance of economic science. The philosophy of economics: An anthology, 1, 73-99. Romer, P. M. (1986). Increasing returns and long-run growth. Journal of political economy, 94(5), 1002-1037. Romer, P. M. (1994). The origins of endogenous growth. Journal of Economic perspectives, 8(1), 3-22. Sen, A., Sen, M. A., Foster, J. E., Amartya, S. & Foster, J. E. (1997). On economic inequality. Oxford university press. Sen, A. (1997). Inequality, unemployment and contemporary Europe. Int'l Lab. Rev., 136, 155. Shahiki Tash, M., Yaghfoori, H. & Darvishi, B. (2015): Review the Intensity of Spatial and Regional Imbalance of Welfare (Comparative Study of Welfare in Iran Provinces based on Harvey and Smith Approaches). Regional Planning, 5(17), 15-30. [In Persion] Shakeri, A., Momeni, F, Khademalizadeh, A., Makhzanmousavi., S. H. (2019), An examination of economic justice based on composite index in an islamic model, Quarterly Journal of Economic Islamic Studies, 19(74), 5-33. [In Persion] Stewart, F. (2005). Horizontal Inequalities: A Neglected Dimension of Development. Palgrave Macmillan UK, London, Ch. 5, 101–135. Stiglitz, J. E. (2012). The price of inequality: How today's divided society endangers our future. WW Norton & Company. Stiglitz, J. E. (2012). Macroeconomic fluctuations, inequality, and human development. Journal of Human Development and Capabilities, 13(1), 31-58. Tanzi, V. (1998). Corruption around the world: Causes, consequences, scope, and cures. Staff papers, 45(4), 559-594. Tanzi, V. & Schuknecht, L. (1997). Reconsidering the fiscal role of government: the international perspective. The American Economic Review, 87(2), 164-168. Theil, H. (1996). Studies in global econometrics, Kluwer Academic Publishers, Boston. World Bank. (2018). World development report 2019: The changing nature of work. The World Bank. World Bank. World development report 2019: The changing nature of work. The World Bank, 2018. Yang, L. (2017). The relationship between poverty and inequality: Concepts and measurement. London School of Economics, CASE paper 205/LIP paper 2, ISSN 1460-5023.
Statistics Article View: 842 PDF Download: 660

Related Links

News

An Analysis of Inequality in Iran's Provinces (Orientations and Outcomes)