Threshold Effects of Government Size on Happiness Inequality in Iran

Happiness and happiness inequality are important issues that economists have been studying in recent years. However, studies addressing the inequality of happiness are limited, and more research is needed to shed light on its antecedents and mechanism. The purpose of this study is to examine the relationship between government size and happiness inequality in the Iranian economy using a threshold regression model during the period of 1974-2016. The results of the estimation of research models show that the size of the government has a threshold effect on happiness inequality. In other words, before the threshold of 13 percent of the government-to-GDP ratio, the government size has a diminutive effect on the inequality of happiness, but after passing through the threshold and increasing the government's involvement in the economy, this variable has a significant positive effect on the happiness inequality. Thus, the expansion of the size of government in the Iranian economy has exacerbated the happiness gap between the low-income and high-income classes of society. Based on the research results, it is suggested that policymakers pay attention to the threshold relationship between government size and inequality of happiness of society when implementing their policies.