Examining the Impacts of Zakat on Income Distribution in Iran; From 2002 to 2012

Decent income distribution is the aim of Islamic economic system. Islamic school of thought introduces unfair income distribution as the basic source of economic problems. Zakat is the most important Islamic tax which has effective roll in arriving to fair income distribution. Therefore this research paper attempted to investigate the effects of Zakat on income distribution in Iran from 2002 to 2012. In this paper we used VAR method, impulse response function and variance decomposition for testing hypothesis. Results reveal that Zakat had significant effect on Gini coefficient in Iran and causes a decrease in inequality through that period.