The Impact of Fiscal Policy and Gas Price Shock on Welfare and Income Distribution in Iran

The relationship between fiscal policy and income distribution is a challengeable subject especially as public welfare is concerned. This paper has investigated the impact of fiscal policy and gas price on income distribution in Iran. It goes without saying that in an economic system like Iran in which oil revenue does have the most impact on, this case would have crucial role. Also in Iranian economy government sector intervention is huge and extensive therefore, economic policies (especially fiscal policy) could change the existent situation. Therefore, measuring the impact of fiscal policy is very conclusive. firstly and generally speaking, the analytical-descriptive method is used in developing this paper. Secondly, the econometric method and especially, auto regression model is used along with time series data for 1353- 1384 period. a) Gini Coefficient has declined from 49.92 to 43.60 during 1353-1357 periods. b) During 1357-1367 3-periods, we observe a considerable amount of fluctuation in Gini coefficient. c) Gini has achieved to 40.43 at the end of 1367. d) During first development program (1368-73) second (1374-78) and third development program (1379-83), Gini has not changed considerably. Gini Coefficient has decreased during 1353-57, has associated with fluctuation on 1357-67 period and has remained almost constant during 1379-1384. Therefore, this coefficient is still showing the inequality in Iranian economy. The final finding is that expansionary fiscal policy has increased the inequality in Iran, however increasing the gas price has declined inequality in it. Of course, enhancing the gas price is recommended if and only if other preliminary conditions for holding the minimum social welfare are satisfied. So the final suggestions of our paper in order to resolve some dimensions of inequality in Iranian economy would be: 1-government intervention, especially in fiscal policy (especially regarding income distribution and social welfare), should be disciplinized seriously. 2- gas pricing other things being equal,(among which are well organizing of public transportations, efficient, just taxing system and providing minimum standard of social security), should, be left to the efficient market framework.