Regional Inequality in Iran and the Impact of Economic Factors: A Spatial Econometric Approach

Regional imbalanced growth and the factors affecting it are one of the most important economic issues in developing countries. In this research, after evaluating the regional inequality at the provincial level of Iran, in order to examine the effect of economic factors on it, it was considered as a spatial econometric model using panel data during the period of 2001 to 2015. The evaluation of Theil inequality indices and Population-Weighted Coefficient of Variation (PW-CV) shows that Iranian provinces are extremely unequal. The results of the estimation of the research model indicate the spatial dependence among the provinces. So that the regional inequality index of each province is affected by neighboring provinces with a coefficient of 34%. In the analysis of economic factors affecting regional inequality; the increase of foreign direct investment and the ratio of industrial production, reduce the inequality of the provinces. But increased provincial spending will increase regional inequality and the tax policy has failed to succeed in redistributing revenue. The results of the study of the direct and indirect effects of explanatory variables on the PW-CV shows that regional inequality is mainly influenced by direct effects, and the effect of the total coefficients on the inequality index is significant.