An Analysis of Inequality in Iran's Provinces (Orientations and Outcomes)

In this paper, attempts are made to empirically examine inequality in Iran which has hindered the government to achieve a balanced provincial socio-economic development. Income inequality affects economic growth sustainability through certain channels such as different saving rates of people, incentives to work hard, political instability and other factors as a whole. The effectiveness of government policies to address a balanced and an equitable development needs of each province depends mainly on quality of existing institutions, individual participation and their capabilities to contribute to development effort in each province. Inequality in provinces is partly due to regional inequality which in turn stems from unequitable provincial privilege to some resources, production specializations, the degree of centralization and unequitable budget allocation. In addition, the orientation and expenditure allocations mechanism pursued by government, if not rightly targeted, may affect spatial planning and economic growth which ultimately brings about inequality. In the present study, we examine how government policies have contributed (if any) to achieve the balanced growth objectives in order to decrease the existing provincial inequality gap. Based on Theil’s and Williamsons indices, we estimated inequality coefficient in Iran’s provinces for the period of 2000 to 2019. The findings in this research show that the policy measures adopted by government in some provinces, have had mixed consequences. For some provinces it has contained and reduced the inequality and for some other province it has worsened the inequality gap over the same period. Based on Theil’s Index, inequality coefficient has increased in provinces such as Tehran and some other relatively more developed provinces and for less developed provinces the index has decreased. Government budget expenditures disbursed among various provinces have had a bearing on inequality through the provision of public physical investment, promoting education provision, expanding health care services and capacity building enhancement.