The impact of government spending on education and health and human capital on urban poverty in Iran

In recent decades the public face of poverty alternative hidden face of Iran's economy. The growth-oriented government in Iran, as the richest decision maker, sees the fight against poverty as its most important socio-economic objective. Government spending is the most important means for achieving intermediate goals such as improving education, health, and economic growth for tackling poverty. Among the different levels of poverty, what is more important in developing countries is absolute poverty. The purpose of this paper is to assess the effect of government spending and human capital on urban poverty in Iran. For this purpose, by analyzing the factors affecting poverty and applying the Markov switching method, the research hypotheses were tested during the period 1985-2014. The results show that urban poverty has two high and low poverty regimes. The probability of staying in a low poverty regime is higher than the probability of staying in high poverty regime. Also, the results show that human capital and the ratio of education expenditures to total government expenditures have had a significant negative effect on the absolute urban poverty index. Based on the results of the study, it is suggested that the share of government education expenditures be increased to reduce urban poverty.