The Relationship between Income Inequality and Economic Growth in Urban and Rural Areas of Iran: Application of Kuznets Curve

In the literature of development economics there are two well known propositions about poverty reduction. (i); poverty can be reduced by promoting economic growth and by improving income distribution. (ii); increasing economic growth may worsen income distribution. This study attempted to investigate the relationship between inequality income and economic growth in urban and rural regions using Kuznets curve during 1980-2007 period. The results showed evidence of the inverted N-shaped relationship between per capita income and inequality of income in rural regions while, there was N-shaped relationship between per capita income and inequality income in urban areas. Also, increment in per capita income by 1 percent increased inequality of income in urban and rural areas by 0.44 and 0.41 percent respectively.