The Effect of Banking Sector Development on Social Welfare in Iranian Provinces

The development of the banking sector by collecting internal and external savings and its efficient allocation to investment needs can facilitate the process of capital accumulation and by boosting economic growth; it will increase the per capita income and its fair distribution in society and help to provide social welfare. Therefore, this research has tried to investigate the effect of banking sector development on social welfare in Iran's provinces during the period of 2007-2017. To this end, the sen social welfare function and the domestic credit to private sector by banks as an alternative to the banking sector development. The research model was estimated using panel data and generalized moment method. The results showed that the effect of banking sector development on social welfare in Iran's provinces is positive and significant. Also, the effect of control variables including inflation rate and unemployment rate on social welfare in Iran's provinces is negative and significant and the impact of tax revenues on social welfare in Iranian provinces is not statistically significant.