Mohammad Reza Eskandari Ata; nader mehregan; Alireza Pourfaraj; Saeed Karimi Petanlar
Abstract
Introduction Regional unbalanced growth and the factors affecting it are one of the most important economic issues in developing countries. One of the characteristics of developing countries is the presence of significant regional inequalities. The existence of this phenomenon is one of the main impediments ...
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Introduction Regional unbalanced growth and the factors affecting it are one of the most important economic issues in developing countries. One of the characteristics of developing countries is the presence of significant regional inequalities. The existence of this phenomenon is one of the main impediments to balanced development in these countries. One of its specific consequences is the creation of inequalities and the consolidation and expansion of deprivation. Inequality alongside widespread poverty can provide grounds for public discontent and thus be one of the concerns of socio-economic policymakers. Considering the importance of balanced regional development in the country and the environmental-spatial potentials and political characteristics of the provinces, this study considers the effects of environmental and political factors on the distribution of inequality in provinces of Iran, considering the neighborhood effects. Theoretical framework Environmental differences play a decisive role in the distribution of regional inequality. At the early stage of economic development, environmental conditions are one of the most determining factors. For example, favorable environmental conditions are often the basis for rapid growth in developing countries. Although the effects of environmental conditions on regional development at higher levels are less pronounced, the specific functions of these factors are still unknown in many countries. In economic literature, several environmental factors influence and are influenced by the distribution of regional inequality. Variables such as cities with coastal boundaries, commercial areas, tourism, water resources, railways, border areas and urban development are among the areas considered in regional studies. Modern governments, unwittingly or unwillingly, engage in various economic policies such as monetary policy, fiscal policy, and commercial policy. Applying these policies shift interests and the pattern of income distribution and create winners and losers across different segments and groups of society, thereby changing regional inequalities. Methodology Spatial inequality refers to situations in which different spatial or geographical units of some variables are at different levels. In the present study, after investigating the regional inequality with regard to the effects of spillover in the provinces, an assessment of the environmental and political factors on it during 2006 to 2015 has been examined. The explanatory variables were compiled according to the purpose of the study, based on environmental and political factors that cause regional imbalances and also according to the statistical constraints of the country. According to the theoretical foundations, identifying variables in previous studies as well as statistical feasibility in the country, from three models has been used to investigate the impact of environmental and political factors on regional inequality. The variables used include urban index, dummy variable for business areas, tourist and religious centers, the logarithm of GDP, ratio of government expenditure to GDP, Ratio of education cost to the government expenditure and the members of parliament. Results and discussion The evaluation of Population-Weighted Coefficient of Variation (PW-CV) indices show that Iranian provinces during the research period have been very inadequate. The results of estimating Spatial Autoregressive with Autoregressive Error (SARAR) regression models indicate a strong spatial dependence among the provinces. So that the inequality index of each province with an approximate coefficient of 45% is affected by the economic inequality in neighborhood provinces. In the analysis of environmental factors affecting regional inequality; urban development, water resources and tourism have a negative relationship with provinces' inequality and as each of these factors increases, the inequality index of the provinces will decrease. But religious and commercial provinces have a positive impact on economic inequality; as a result, inequalities are higher in these provinces. Results of the estimation of the impact of political variables on regional inequality show that the provinces with a more gross domestic product, have a higher inequality index. Moreover, the larger the size of the government in the provinces, the more economic inequality. Also, increasing the share of education costs from provincial budgets increase regional inequality and in the provinces where the number of members of parliament is higher, there are more economic inequalities. Conclusions and suggestions According to the results of the present study, the importance of the distribution of inequality in different provinces and the effects of neighborhoods with regard to environmental and political factors are overemphasized. Governments and trusted entities in different areas can be more successful in delivering social justice and reducing regional inequalities by designing and implementing management policies tailored to each province's environmental and political potentials. Managing water resources, paying attention to tourism, controlling suburbs in big and religious cities, and implementing income redistribution policies are some of the policies that can be implemented in environmental and operational areas. Reducing government tenure and administrative bureaucracy are also some of the factors that will be effective in reducing regional inequalities.
Habib Ansari Samani; Razieh Davoodi
Abstract
Value Added Taxes, as a suitable substitute for all types of sales taxes, despite the benefits, lead to disadvantages such as the pressure on the general level of prices (Ikpe & Nteegah, 2013). As inflation has always been one of the most important problems in the Iranian economy, it was a concern that ...
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Value Added Taxes, as a suitable substitute for all types of sales taxes, despite the benefits, lead to disadvantages such as the pressure on the general level of prices (Ikpe & Nteegah, 2013). As inflation has always been one of the most important problems in the Iranian economy, it was a concern that in a situation where the country faces a severe structural inflation and inflationary sanctions, will the implementation of the value added tax program increase inflation?
Taking into account the predictions made by the researchers and the executives of the project, we aim to study the issue. 7 years have passed since the VAT was implemented, therefore, it will be necessary to survey the effects of this tax. This paper will survey the inflationary effects of VAT in Iran provinces.
Theoretical Framework
Implementation of value added tax (VAT) from two direct and indirect channels affects the general level of prices. Since the value added tax is an indirect tax based on consumption, a portion of this tax burden is imposed on the final consumer. As a result, implementation of VAT, at least in the early stages, directly leads to a leap in the price of goods and services that are taxed.
Also, the implementation of the value added tax affects the general level of prices indirectly by affecting determining factors of inflation, such as liquidity, expectations and production costs. Experiences of different countries in controlling inflationary effects of VAT show that there are two issues in this regard. The first is which tax does VAT replace? (Which taxes have been eliminated) and the second is the country’s monetary situation (Tait, 1988). If the value added tax replaces one or more direct and indirect taxes, it does not impose a severe pressure on prices because the amount of tax received from the goods does not change much, and only the types of taxes and taxation methods change.
The study of other countries’ experiences shows that if inflation control is one of the main goals of monetary and credit policies and that the government in monetary and financial policies takes into account the issue of inflation, then the implementation of the VAT system along with the inflation controlling short-run policies can be made without a sharp increase in prices (Naderan & Ranjabarkey, 2008).
Methodology
In order to test the hypothesis that VAT has a positive and significant effect on inflation in Iran's provinces, we use provinces variables such as inflation, effective rate of VAT, unemployment rate, current and construction, local government size, oil and without oil production per capita, and the ratio of deposits to production from 2008 to 2013. The Econometric hypothesis testing method is a multivariate regression analysis with panel data.
Findings
The findings show that there is a positive and significant relationship between unemployment rate and provinces’ inflation, which shows the stagflation in Iran's economy Moreover, the current size of the government has a positive effect on inflation, since an increase in government spending will lead to an increase in the budget deficit, public sector debt will increase, and will lead to an increase in the supply of money. Given the positive relationship between the general level of prices and liquidity, raising the money supply will lead to an increase in the general level of prices. Whatever the state budget allocates to development expenditures and government development expenditures by improving production and strengthening the supply side will cause macroeconomic surpluses and will reduce inflation. Since VAT affects the sale price of final goods, it is likely that sellers will conceive of increasing production costs and transfer tax burden to consumers. On the other hand, some manufacturers of goods that are not subject to VAT imagine that the tax on their goods and services will also apply and increase the price of their goods. Therefore, the findings show that there is a positive and significant relationship between the value added tax and inflation in the provinces of the country. The high ratio of deposits to production in the in the ceteris paribus situation indicates that people prefer to hold liquidity in banks. This liquidity will be driven by investment in the supply of various sectors of the economy and will reduce inflation. An increase in domestic production of oil will lead to an increase in the supply of foreign currency and, subsequently, a decline in the exchange rate. Due to the negative relationship between the exchange rate and the rate of inflation, the exchange rate cuts have led to an increase in inflation, and the negative relationship between oil production and inflation is justified. Also, the findings show that there is a positive and significant relationship between the oil-free domestic production and inflation in different provinces.
Conclusions and Suggestions
In this study, the inflationary effects of VAT were investigated using multivariate regression in panel data. For this purpose, after collecting provincial data, the inflation effect of VAT in a model with dependent variable of price level growth rate along with the major variables affecting inflation was measured. Given the positive impact of VAT on inflation, it is recommended that the government initially takes caution in increasing the VAT rate, and secondly, pay closer attention to direct taxes and alternative VAT taxes that have high incomes and low inflationary effect.
