Analyzing the Impact of Economic Shocks on Income Inequality Distribution in Urban Areas of Iran: A Provincial Study

Document Type : Original Article

Authors

Morteza Zakerean ¹

yaghob fatemi zardan ²

kazem revayati ³

¹ Director General of South Khorasan Department of Economic Affairs and Finance, Birjand, Iran

² Bu-Ali Sina University

³ M.A., Islamic Azad University, Birjand, Iran

https://doi.org/10.22067/erd.2026.91911.1277

Abstract

Income inequality is one of the major economic challenges that significantly impacts the economic development of provinces. This phenomenon creates serious obstacles to provincial progress by reducing equal opportunities, increasing social instability, and limiting economic growth. Accordingly, the primary aim of this study is to examine the effects of economic fluctuations on income inequality in the urban areas of Iran's provinces. To achieve this objective, the present study utilizes a Bayesian panel model to analyze the impacts of inflation, economic growth, government expenditures, household income, unemployment rate, and population growth on the Gini coefficient of urban areas in 31 Iranian provinces over the period 1382–1402 (2003–2023). The findings indicate that, in the long term, inflation, government expenditures, unemployment rate, and annual household income changes have a positive effect on inequality across all provinces. In contrast, economic growth reduces inequality in the long term and positively contributes to income distribution. Additionally, the impact of population growth on inequality in urban areas of the provinces varies, reflecting the influence of regional variables. Furthermore, variance decomposition results reveal that, excluding the effect of the variable itself, inflation has the most significant impact in 20 provinces, while government expenditures are the most influential economic factor on the Gini coefficient in 11 provinces. The study's findings underscore the necessity of adopting targeted policies to reduce inflation, promote sustainable economic growth, and optimize government expenditures.

Keywords

Gini coefficient

income inequality

economic fluctuations

economic growth

Bayesian panel model

Subjects

• economic development

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