The effect of financial development on urban and rural income inequality in Iran: A GMM Approach

Development of financial infrastructure as an efficient tool to increase invariably economic growth, poverty reduction and equitable distribution of income in society is crucial the purpose of this study is to evaluate the effect of financial development on rural and urban inequality in Iran using panel data of 31 provinces, in the years 1385 to 1394. For this purpose, the data on the average income of urban and rural households, government spending (indicate the size of government intervention), per capita gross domestic product , the rate of urbanization and percentage of GDP as an indicator of financial development, collected and organized and then, a model using panel models (both static and dynamic), it is estimated.The results show that the Kuznets inverted U-curve hypothesis is not confirmed in Iran's provinces. It can also be said that the effect of government size is negative and it reduces the inequality of income between rural and urban households