The Effect of Financial Development on Income Inequality in the Iran’s Economy Using Non-linear Cointegration Technique

Zarranejhad, Mansour; Hosseinpoor, Abdolkarim; Anvari, Ebrahim

Document Type : Original Research

Authors

¹ Professor of Economics, University of Shahid Chamran, Ahwaz, Iran

² Ph.D. of Economics, University of Persian Gulf, Bushehr, Iran

³ Ph.D. of Economics, University of Shahid Chamran, Ahwaz, Iran

Abstract

Different theories have different predictions about the relationship between financial development and income inequality that leads to two broad categories of thought with two conflicting theoretical hypotheses. This study examines the effect of financial development on income inequality in the Iran’s economy by using a Threshold Error Correction Model (TVECM) form 1971 to 2013. The results of TVAR.LR test show that the model has only one threshold. The results of the TVECM.Seo and TVECM.HS tests represent a threshold cointegration between the variables. Also, the results of Threshold Error Correction equation indicate that before reaching the threshold value, an increase in financial development causes increases in the Gini coefficient. But after reaching the threshold value, financial development reduces income inequality (decreases Gini coefficient) in the Iran’s economy.

Keywords

20.1001.1.23832126.2015.2.12.2.1

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International Journal of Management, Accounting and Economics

The Effect of Financial Development on Income Inequality in the Iran’s Economy Using Non-linear Cointegration Technique

References

References

Volume 2, Issue 12 - Serial Number 17
December 2015
Pages 1420-1434

The Effect of Financial Development on Income Inequality in the Iran’s Economy Using Non-linear Cointegration Technique

References

References

Volume 2, Issue 12 - Serial Number 17December 2015Pages 1420-1434

Volume 2, Issue 12 - Serial Number 17
December 2015
Pages 1420-1434