Financial Markets Development and Income Inequality in Iran

Distribution of income due to its economic and social effects has always been the focus of attention of economists. In this study, we measure the effect of money market development on income inequality in Iran by using autoregressive distributed lag (ARDL) from 1967 to 2006. The results show that money market development reduces income inequality in the long-run and short run. Furthermore, literacy and economic growth rate would decrease inequality. There was a positive significant relationship between the degree of economic openness and income inequality. The study results emphasize on the necessity of promoting the money market as an important policy tool to reduce income inequality.