Analyzing the Impact of Economic Growth on Welfare in Iran, with an Emphasis on the Role of Income Inequality

Document Type : Scientific paper

Authors

1 Associate Professor in Energy Economics, University of Mazandaran, Babilsar, Iran

2 Master's Student in Energy Economics, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran.

3 Ph.D. Student in Econometrics, Faculty of Economics, Allameh Tabataba'i University, Tehran, Iran.

10.22080/mrl.2025.28042.2130

Abstract

In the present study, an attempt was made to examine and test the impact of economic growth on Iran’s economic welfare, with an emphasis on the role of income inequality, during the period 1978–2022. This analysis was conducted using the Autoregressive Distributed Lag (ARDL) approach. To this end, economic welfare was first estimated using a composite index based on four dimensions: consumption flow, wealth stocks, income distribution and economic security. Regarding income inequality, two indicators were employed: the Gini coefficient and the ratio of the expenditure of the tenth decile to the first decile. The research models were specified and estimated based on each of these two indicators. The results of calculating the composite welfare index indicate that economic welfare followed an increasing trend from the First Development Plan to the Fifth Development Plan. However, economic growth and income inequality exhibited a fluctuating trend. The long-run estimation results reveal that economic growth has had a favorable (positive) effect on economic welfare. However, at higher levels of income inequality, the positive impact of economic growth on welfare diminishes. Unemployment and inflation have had adverse (negative) effects on welfare, while real GDP per capita has had a favorable (positive) impact. Moreover, during the post-JCPOA period (2017–2022), Iran’s economic welfare has significantly declined.

Keywords

Main Subjects

References

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Macroeconomics Research Letter
Volume 20, Issue 45
May 2025
Pages 77-109

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History

  • Receive Date: 14 November 2024
  • Revise Date: 11 March 2025
  • Accept Date: 09 April 2025

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