The Impacts of Fiscal Policy on Income Distribution and Economic Growth in Iran

The issues of redistribution of income and economic growth have been debatable in economics. This paper shows in a simple model if we redistribute income correctly (i. e. tax the rich who have lower marginal propensity to consume and pay to the poor who have higher marginal propensity to consume), income equality and economic growth will improve. But according to the result of this paper, there is an inverse trend in fiscal policy of government in Iran during 1338-86. In other words, most resources of government income have been taken from the poor and most government expenditures have been attracted by the rich. This process has increased income inequality and diminished the economic growth rate.