Analysis of the Dual Effect of Inflation on Income Inequality in Iran with emphasis on the Total Basket and Commodity Groups

In the present study, an attempt has been made to investigate the dual effects of inflation in the total basket and commodity groups on income inequality in Iran. For this purpose, a nonlinear autoregressive distributed lags (NARDL) and annual data from 1972-2020 is used. Research model in two formats with the aim of estimating the asymmetric effect of total basket inflation and inflation of 7 commodity groups (including 1. Food, beverages and tobacco, 2. Furniture and appliances and services used at home, 3. Health, 4. Housing, fuel and lighting, 5. Recreation and cultural affairs, education, restaurants and hotels, 6. Transport and communications 7. Clothing and footwear) on income inequality (share of the richest ten percent to the poorest ten percent) in a non-linear format) Was specified and estimated. The results in the first format (considering the total basket inflation) indicate that inflation is associated with a symmetrical effect and, conversely, the unemployment rate is associated with an asymmetric effect on income inequality. Government social expenditure has the opposite effect on inequality, and GDP per capita has a U inverted shape relationship with income inequality. In the second form, in the long run, increases and decreases in the inflation rate of the health group do not have a significant effect on income inequality. Inflation rate in the two groups of food and beverages and the group of entertainment and cultural affairs is associated with a direct and symmetrical effect on income inequality in Iran. Inflation rates in the furniture and housing, housing, transportation, communications, and clothing groups inversely and asymmetrically affect income inequality. Other results indicate that although the level of income inequality in the Iranian economy decreased after the revolution, it was not significantly different during the war from other years.