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Showing 13 results for Income Distribution

Mrs Roshanak Fani, Dr Hossein Raghfar,
Volume 0, Issue 0 (12-2024)
Abstract

Aim and Introduction
This paper examines the distribution of income in Iran from 2006 to 2016 and evaluates the validity of one of the latest economic theories concerning income distribution, namely, the Econophysics Two-Class Theory of Income Distribution (EPTC).
According to this model, income distribution generally comprises two classes. The lower class of this distribution, typically representing 97 to 99% of th society, follows the exponential (thermal) Boltzmann-Gibbs distribution, primarily driven by labor income. This distribution remains stable over time and undergoes minimal fundamental changes. Conversely, the income distribution of the upper class, constituting approximately 1 to 3% of society, follows the Pareto distribution, recognized as a superthermal distribution in econophysics. Notably, this distribution exhibits high variability over time, closely mirroring fluctuations in the stock market.
For this study, a review of the theoretical literature on the statistical distribution of income is conducted, tracing its evolution from Pareto's initial attempts to the formulation of the two-class distribution of income. In the methodology section, emphasis is placed on delineating the characteristics of two Probability Density Functions (PDFs) and Complementary Cumulative Distribution Functions (CCDFs) associated with exponential and Pareto distributions. The methodology elaborates on the approach to detecting income distribution patterns within the framework of the aforementioned theory. Subsequently, in the data and findings section, an examination of the income data spanning the specified time period in Iran is undertaken. The section meticulously explores the compatibility of these data with the EPCT, offering detailed discussions on the observed patterns and their alignment with the theoretical framework. Finally, the implications of the EPCT are elucidated, and the paper's conclusions are presented in the concluding remarks section.
Methodology
In complex systems concluding big data or complex models, alternative approaches beyond conventional statistical tests may be employed to estimate distributions. Visual inspection and descriptive analysis, facilitated by histograms and distribution charts, serve as effective tools for approximating distributions without relying on statistical tests. The selection of distributions is informed by theoretical considerations that align with the underlying characteristics of the system. These alternative methods offer practicality and informativeness, particularly in scenarios where traditional statistical assumptions may not hold or when dealing with extensive and unconventional data. The present article adopts this methodological approach to analyze income distribution in Iran.
The initial step involves drawing the histogram and probability density function (PDF). The shape of the histogram guides the identification of distribution. Given the potential complexity arising from large datasets, and the ambiguity that may arise from visual inspection of merely the PDF, a Complementary Cumulative Distribution Function (CCDF) plot serves as a valuable aid. Subsequently, following the first step and the selection of candidate theoretical distributions, the CCDFs are plotted to ascertain the optimal fit with the experimental data distribution. Consequently, the combined use of PDF and CCDF serves as indispensable tools for delineating annual income distribution patterns.
The resemblance between the graphs of the PDF for both exponential and Pareto distributions on a linear-linear scale poses challenges in distinguishing between these distributions. Similarly, the CCDF curve lacks clarity on a linear-linear scale due to this similarity. However, employing a logarithmic-linear scale to plot the survival function related to the data of the lower part of society proves beneficial, as it reveals a smooth line representative of the exponential Boltzmann-Gibbs law. Similarly, plotting the survival function for the upper part of the society on a logarithmic-logarithmic scale serves to elucidate the Pareto power law. Consequently, plotting the survival function for the entire dataset on a logarithmic-logarithmic scale, as per the hypothesis of the EPTC, should unveil two distinct segments: exponential and Pareto.
Findings
The data utilized in this study were derived from the raw tables pertaining to the household expenditure-income (budget) plan, annually published by the Statistical Center of Iran. Specifically focusing on data sourced from the urban population, which constituted approximately three-quarters of the total population during the study period. Data preparation commenced with the meticulous removal of zero and negative values, followed by deflation adjustments based on the consumer price index. Subsequently, data normalization was conducted utilizing the slope of the line of the CCDF for the lower part of the dataset, plotted on a logarithmic-linear scale for each year. This normalization process was initiated based on the initial estimate of the border income, set at the 99.7th percentile. Finally, an appropriate binning strategy was selected, with a uniform value of 0.4 (∆r≈0.4T) applied to all data subsequent to the initial 0.2 portion.
Plotting the PDF of the income pertaining to the lower class of the society across three scales—linear-linear, logarithmic-linear, and logarithmic-logarithmic—alongside the fitting line of the exponential distribution function for the year 2016 revealed a notable alignment, indicative of a robust fit with the theoretical exponential distribution.
Alternatively, the survival function chart was employed to analyze the income distribution among the upper class of society. Presenting this data graphically across three scales—linear-linear, logarithmic-linear, and logarithmic-logarithmic—for the entirety of 2016 underscored two key findings. Firstly, the tail-end distribution of income follows the Pareto distribution. Secondly, and of paramount significance, these graphical representations unequivocally affirmed the appropriateness of dividing the dataset into two distinct segments.
Plotting the PDF for the 11-year period revealed that the data pertaining to the lower part of the society, representing 99.7% of the total population, converged onto a singular curve following normalization across the entire duration under study. Subsequently, depicting the survival functions for the aforementioned 11-year time frame in a unified graph, utilizing both logarithmic-linear and logarithmic-logarithmic scales, served as a more definitive validation of the two-class theory of income distribution.
Discussion and Conclusion
The analysis of income data in Iran from 2006 to 2016 reveals a distinct two-class structure in the country's income distribution.
Firstly, the lower class, encompassing approximately 97 to 99.7% of the population, follows the exponential Boltzmann-Gibbs distribution, primarily driven by labor income. This statistical distribution reflects a cumulative process characterized by a constant rate of decrease, as indicated by the exponential distribution's parameter. The consistency observed in the exponential fit graphs of the survival function and data histogram across different years suggests the stability of income distribution within the lower class over time. This stability parallels thermal equilibrium in physics, suggesting that the majority of the population is in a stable equilibrium. Notably, the high-resolution histogram of the PDF reveals a sharp and narrow peak at low incomes, attributed to governmental policies such as the imposition of minimum wage regulations.
Conversely, the upper class, constituting approximately 0.3 to 3% of the population, follows a Pareto distribution, predominantly influenced by capital income. However, unlike the lower class, the distribution of income within this part does not align along a single line in the power law segment. This part undergoes discernible fluctuations from year to year, indicating instability within this economic sector. These fluctuations are attributed to the variability of capital income

Soheila Parvin, Ehsan Taherifard,
Volume 8, Issue 4 (1-2009)
Abstract

The aim of this paper is to investigate empirically the effects of monetary policy on poverty and income distribution in Iran using the data over the period 1976-2005. Monetary policy is one of the most potent instruments for managing the economy. There is a useful question to ask if the monetary policy is used as an instrument to reduce poverty. Most of the existing literature on monetary policy and poverty focuses on the short run. Monetary policy affects most of the macroeconomic variables such as output, unemployment, and inflation. Moreover, anticipated inflation and unanticipated inflation redistribute differently income from creditors to debtors. If poverty and inequality respond to these macroeconomic variables, monetary policy affects the well-being of the poor. The findings of this study show that monetary policy cannot be used as a poverty alleviation policy in Iran, since the expansionary monetary policy followed commonly by expansionary fiscal policy results in a rise in budget deficits. This policy increases the aggregate demand for all the goods and services in the economy resulting in higher inflation. Furthermore, there is no significant link between monetary policy and investment through interest rate. Consequently, monetary policy has no supply side effects in the economy and just it increases inflation rate. As a result of expansionary monetary policy, the poor would find its real income being gradually eroded by the growth in money supply, and hence the possibility of running into poverty.
Mohammad Ali Moradi,
Volume 10, Issue 2 (7-2010)
Abstract

Since the first oil shock in 1973, almost the economic performance of Iran has been related to its natural resource wealth. The economy has experienced relatively lower per capita GDP growth and higher income inequality. This may support this hypothesis that natural resources seem to have been more of a curse than a blessing for Iran. This paper aims to analyze the effects of oil resource abundance on two major macroeconomic variables, economic growth and income distribution, in Iran using the data over the period 1968 - 2005. I take a time series perspective and focus on major forces of economic growth including oil resource. Moreover, the main determinants of income distribution are theoretically specified to examine the effects of oil resource. Due to the problem of data availability, and ARDL approach is employed to estimate the empirical models. Using the production function approach, the results of the study confirm that the overall long run effect of oil abundance on GDP is positive and significant but the value of the estimated coefficient is too small. The findings show that physical capital and human capital have positive and significant effects on GDP in the long run. Moreover, this study finds that oil abundance have negative and significant effect on income distribution. It means that oil revenue improves income equality in Iran. It should be point out that while the Gini coefficient is relatively higher compared to most countries, poverty level are substantially lower because of the distinguished social welfare system in the country and cohesive system of private social responsibility through a religious charitable system. However, income and human capital have a negative and significant effect on income distribution. The overall findings appeared to support this hypothesis that oil abundance is not a blessing for Iran.
Hossein Sadeghi, Abbas Assari, Arashk Masaeli,
Volume 10, Issue 4 (1-2011)
Abstract

Over the past decades, one of the most important indicators of the development and welfare was economic growth or any quantitative variables such as gross domestic product and income per capita. As long as the World has experienced a wide gap among rich and poor countries, economic growth as the only effective factor in welfare was questioned and consequently, gross domestic product distribution and other issues related to social justice raised as a distinguished feature of welfare and development economics. Estimating welfare trend in Iran can mirror the policies imposed by policymakers. Therefore, this paper aims to estimate welfare index during 1974- 2006 period. In this paper MATLAB software is used to estimate welfare employing fuzzy logic model using Sen's approach. The results of this study show that in spite of high degrees of vacillation, welfare trend was ascending during the aforementioned years. The maximum value obtained was 0.715 in 2005 while the minimum value obtained was 0.421 in 1994.
Nader Mehregan, Saied Garshasbi Fakhr,
Volume 11, Issue 4 (1-2012)
Abstract

This paper, using an economic analysis of crime, focuses on the relationship between crime and income inequality in Iran. The results indicate that there is a significant relationship between crime and income inequality in Iran. This means that by increasing income inequality in Iran the robbery as a crime will increase as well. In addition the findings reveal that there is a direct relationship between robbery and the proportion of people in urban areas, divorce and unemployment rate, but there is a negative relationship for households’ monthly income in Iran.
Hossein Sadeghi, Morteza Ezzati, Ali Shafiei,
Volume 13, Issue 2 (7-2013)
Abstract

One of the most important institutions and the special gift of divine religions including Islam is charity institution. Charity may overcome many social problems like poverty and disarray of the income and expenditure. This research is intended to investigate the factors influencing charity and the charity function behavior according to the teachings of Islam and to estimate empirically charity function in Iran. Regarding theoretical and empirical studies on religious expenditure and Islamic taxes; and considering Islamic rules and statistical limitations, the selected explanatory variables are income, wealth, age of householder and religious capital. The charity function is estimated using a panel data consisting of provincial data during the years 2000-2007. The estimation of an exponential charity function shows that charity is an increasing function of provincial per capita income, wealth and religious capital. Using direct data on charity and entering religious capital and wealth as effective factors on charity are of innovations of the paper which differentiates current research from the other studies.

Volume 16, Issue 1 (1-2014)
Abstract

This paper explores the distributive impacts of subsidy removal in agricultural sectors and related industry in Iran, using a social accounting matrix (SAM)-based price model. The structural path analysis approach is used to decompose the overall influences into direct, global, and total effects. The simulation results reveal that a shock therapy strategy, which involves the removal of all subsidies from all food producing sectors at once, amplifies the adverse effects of this policy option, especially on the low income households. Also, results indicate that removing subsidy from food producing sectors has distributional consequences for the Iranian households. The rural low income group is the most adversely affected group while the urban high income group is the least affected among the Iranian households. In addition, reducing subsidy in food industry sector has the largest impact on the households’ welfare. Based on the results of the path decomposition of the households’ expenditure, it is expected that less than 50 percent of the overall effects of subsidy removal appear almost immediately after implementing this policy.
Batol Rafat, Elaheh Jazizadeh,
Volume 16, Issue 3 (11-2016)
Abstract

Distribution of income in society is so important that almost all economists consider it as one of the main aims and missions of the government. As credit constraints cause inequality in society, thus the development of financial intermediaries and financial markets in national level, which affects access of the low-income and poor individuals to credit and financial services, can influence significantly income redistribution in the country. This study aims to examine the relationship between financial development and inequality among the Iranian provinces. By using fixed effects panel data model, and applying Galor-Zeira theory, the relationship between financial development and income distribution is tested in Iran during 2000-2011. The results show that increasing proliferation of financial intermediaries has negative impact on Gini coefficient and results in more equitable income distribution across the provinces.
Mohsen Zayanderoody, Mohamad Khosroabadi, Alireza Shakibaeei,
Volume 17, Issue 3 (9-2017)
Abstract

With regard to the increasing income inequality, higher unemployment rates, urbanization, economic inefficiency, lack of economic justice in different societies especially within developing countries, and highlighting the role of governments in achieving a better distribution of incomes, the need for good governance is strongly felt.  This study aims to examine the impact of the good governance on income distribution among the South-Western Asia countries during the period from 1996 to 2013. It estimates two panel data models using Stata12 software. In the first model, the index of good governance quality and in the second model, six indicators of good governance are investigated. The results show that the index of governance quality and the indicators of political stability and government effectiveness have negative and significant effects on reducing inequality. Thus, the proper policy-making may improve the distribution of income in these countries.
Esmaiel Abounoori, Ali Souri, Mahboobeh Farahati,
Volume 17, Issue 4 (3-2018)
Abstract

This research aims to determine whether the employment in Iran is affected by goods market based on post-Keynesians theory, or by labor market based on neoclassical theory. Using time series data on profit share, capital accumulation, unemployment rate and capacity utilization in a structural vector auto-regression (SVAR) model, this article evaluates the linkages among unemployment, income distribution and effective demand in Iran during 1967-2013. The results show that an increase in capital accumulation in goods market leads to significant decrease in unemployment rate. In other words, according to the post-Keynesians theory, unemployment in Iran is demand-induced. On the contrary, according to neoclassical theory, income redistribution in favor of profits (change of real wage in labor market) can reduce unemployment directly due to substitution between labor and capital or indirectly through increasing capital accumulation and/or rising capacity utilization. Therefore, in order to pass recession and to increase employment we can focus on goods market by increasing investment and income redistribution in favor of profits.
Parviz Davoodi, Mr. Mohammad Sarlab,
Volume 19, Issue 2 (6-2019)
Abstract

Improving the distribution of income is one of the main goals of governments in economic policy, regardless of the orientation of different systems. The purpose of this study is to investigate the distributive effects of monetary policy on income distribution in urban and rural areas of Iran. In this regard, the values of macroeconomic variables during the period of 1959-2014 and the household budget data over the period of 1997-2014 were used. The monetary policy was considered in three scenarios, including the increase in facilities granted to the private sector, the decrease in the reserve requirement ratio and decrease in the excess reserves ratio. The results showed that expansionary monetary policy improves the distribution of income in the short run, but in the long run it worsens the distribution of income due to its inflationary effect. An increase in facilities granted in the short term reduces the Gini coefficient in urban and rural areas, and whole country. However, it increases the Gini coefficients in all three sections in the long run. Reducing the reserve requirement ratio in the short run reduces Gini coefficients, but it does not change the whole Gini coefficient in the long run, but it increases the Gini coefficients in urban and rural areas. The effect of reducing excess reserves ratio is similar to that of reducing reserve requirement ratio.
Dr Mahnaz Rabiei,
Volume 22, Issue 1 (3-2022)
Abstract

Today, information and communication technology (ICT) has affected human societies in all dimensions. Despite its significant effects on the economic, political and social development of societies, this technology also has adverse effects. Among these effects, we can mention the background of information and communication technology on social actions and conflicts. Accordingly, in this study, using Autoregressive Distributed Lag method the effect of information and communication technology and income distribution (Gini coefficient) on social unrest was investigated in Iran during the period 1984-2018. The Internal Conflict Index presented by the ICRG Political Risk Index was used as a proxy for social unrest. The results showed that information and communication technology and unfair income distribution significantly increases social unrest in Iran. As well as Inflation also significantly increases social unrest in Iran. However, GDP per capita has no significant effect on Iran's social unrest. Therefore, the policy of developing information and communication technology based on the internal Internet network, improving income distribution and curbing inflation in controlling Iran's social unrest seems necessary.
Mr. Ali Moftakhari, Dr Mohammad Jafari, Dr Esmaiel Abounoori, Dr Younes Nademi,
Volume 22, Issue 2 (6-2022)
Abstract

Income inequality and efforts to its reduction it is one of the most important concerns of societies in today's world.  On the one hand, countries are looking for revenue sources and, on the other hand, are trying to reduce income inequalities. In addition, due to the unequal distribution of income and the impact of migration contrary to the policies of societies, migration makes it difficult to achieve the desired economic growth. Therefore, considering the importance of the consequences of migration, the main purpose of this paper is to investigate the nonlinear effects of income inequality on brain drain in developing countries. Based on the findings of the study, the inequality in income distribution has a threshold effect on brain drain in developing countries. As long as inequality is at levels below 0.46, this variable has a negative and significant effect on brain drain, but after exceeding the threshold of 0.46 and being in a high inequality regime, the intensification of inequality increases the brain drain sharply. In other words, society tolerates a degree of inequality, but the intensification of inequality beyond the tolerable level of society causes the elites to migrate to developed countries, which are more equal, in search of a better life and proportionate to their capabilities.

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