Non-linear relationship between poverty and the size of the government in the Iranian economy: using a threshold regression method

Since government duties and goals have been tended toward welfare and supportive duties over the time, the poverty and role of the government in the reduction it has been the attractive research issue for specialists and policy-makers in developed and developing societies. In this line, we hypothesized that there is a nonlinear relationship between poverty and the size of the government in Iran. The influential factors on extreme poverty are determined by using the threshold regression method. The results show that the size of the government has a threshold effect on extreme poverty. The estimated threshold is about 5.21 percent. In other words, if the size of the government is smaller than the threshold, the size has a negative and insignificant effect on the extreme poverty. In another side, the size of the government has a positive and significant effect on extreme poverty if the size of government is larger than the threshold.