The Effect of Factor Productivity Changes on Rural Poverty Indexes in Iran

This study aims at investigating the effect of factor productivity changes on rural poverty indexes over the period of 1981-2007. It estimates a simultaneous model through three Stages Least Squares (3SLS) method. The results indicate that the productivity improvements can reduce poverty indicator, and the resulting coefficients reveal that a productivity change by one percent in land and labor force tends to reduce the poverty index by 0.759 and 0.349 percent, respectively; and since the coefficients of the variables affecting the productivity in the model (ie R&D, fertilizers, labor force, machinaries per ha, and rate of litracy) are significant, considering each one of them could be effective in poverty reduction. In addition, according to the factors affecting the improvement of income distribution in the Gini coefficient equation, we can state that increasing the government expenditure would lead to a more equitable distribution of income and reduce poverty in rural areas.