Effects of oil price volatility on Gini coefficient in Iran using VECM Method

Due to high dependence on oil revenues, fluctuations of oil prices have great effects on the Iranian economy, since the bulk of oil revenues belongs to the government, and forms the current and development expenditure. As a result, determining the severity of impact of oil price fluctuations on the Gini coefficient is very important. This study examines the asymmetric effects of oil price volatility on the Gini coefficient with Vector Error Correction Model (VECM) in Iran during 1978-2013. For this purpose, the Gini coefficient, GDP in 2004 prices, tax revenue, the real government expenditure, inflation rate, unemployment rate and positive and negative changes in oil prices are entered to model. The results reveal that both positive and negative fluctuations caused by changes in oil prices affect the Gini coefficient, and positive effect of fluctuations in oil prices is higher than the negative effect of fluctuations in oil prices.