Analysis of Factors Affecting Economic Inequality in Iran Using Micro-data

The main purpose of this research has been to estimate a model of factors affecting economic inequality in Iran. Doing so, using income-expenditure Micro-data, first Gini coefficients and shares of income twenties have been estimated for the years 1984-2004. Using the time series data and Cointergration method, factors affecting economic inequality have been estimated. According to the results, employment ratio (share of employment in population) and government social expenditure per household have decreasing inequality effects. On the other hand, income tax per household and inflation increase the inequality. To analyze the effects on different twenties, the SUER model has been estimated. The results indicate that increase in ratio of employment has reduced inequality via decrease in 4th and 5th twenties in favor of the other twenties, especially the 1st twenties. Increase in government social expenditure per household has decreased inequality through the reduction in share of the top twenty percent in favor of the rest (%80). On the other hand, increase in income tax per household and inflation has increased inequality through the reduction in share of the first four twenties of the population in favor of the top twenty percent. In order to compare effects of the variables, all the variables have been used in standard forms: employment ratio and the income tax per household have had the highest reduction and lowest increasing economic inequality effects, respectively. But, the increasing effect of income tax has been more that the decreasing effect of employment ratio. Thus, productive job creation policy and effective tax collection procedure may be emphasized.