Analysis of the Factors Affecting Income Inequality in Iran in the Framework of Thomas Piketty's Perspective: Structural VAR Approach

Reduction of inequality and social justice by balancing the distribution of income and wealth is one of the concerns of economic policy makers and has been underlined by the constitution law in Iran. In the meantime, the explanation of the relationship between inequality and the factors affecting it has been a challenging area of economic debate in recent decades, and despite extensive research in this area, there are still many ambiguous issues in this regard. In this regard, in recent years, a new hypothesis has been presented by the French economist Thomas Piketty. In his analysis, Piketty's main factor of inequality is the gap between the rate of return on capital and the economic growth rate (r-g). But, despite offering logical explanations consistent with changes in the patterns of inequality, no empirical test has been done for the scientific-theoretical chain. Therefore, the question arises as to how much Piketty's hypothesis is empirically convincing and capable of explaining the rise of inequality for different countries? For this purpose, this paper, using the Structural Vector Autoregressive pattern (SVAR), analyzes the factors affecting income inequality in Iran within the framework of Thomas Piketty's perspective during the period of 1973-2016. The results of this study showed that the increase of gap (r-g) has no positive and significant relationship with the increase of inequality and share of capital from national income in Iran and there is no evidence to confirm Piketty's hypothesis in Iran.