Spatial Analysis of the Effect of Inflation and Unemployment on Poverty in the Iran’s Provinces

Poverty is one of the most important obstacles to economic development and the cause of many economic problems in all countries. Therefore, recognizing the main factors affecting poverty is very important for the policymakers in the field of right economic policy. Therefore, this study examines the effect of inflation and unemployment along with the two variables of government healthcare expenditures in GDP and population growth on the Gini coefficient, as an indicator of poverty in the provinces of Iran, during the period 2006-2018 using spatial econometric approach to investigate the provincial spillover effects. The results showed that inefficient healthcare expenditures, which along with population growth are the most important factors influencing the deterioration of income distribution without increasing human capital and unemployment rate, has been increasing due to the young population of Iran and its increase in the labor market in different years and inflation, which has risen sharply in recent years due to rising sanctions, has made people poorer. These are factors that have worsened income distribution and increased poverty in the provinces of Iran. Also, the spatial proximity between the provinces worsens the income distribution. Therefore, policies to reduce poverty, improve welfare and improve income distribution in all provinces need to be adopted in a balanced way in order to improve income distribution.