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Analyzing the Impact of Fiscal Policy (Income Tax) on Income Distribution in Iran by Autoregressive Distributed Lag (ARDL) Approach

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  • Mollaesmaeili Dehshiri, Hassan

    (Department of Management and Economics, Science and Research Branch, Islamic Azad University)

  • Pajouyan, Jamshid

    (Department of Management and Economics, Science and Research Branch, Islamic Azad University)

  • Hosseini, Shamseddin

    (Department of Economics, Allameh Tabataba'i University)

  • Ghaffari, Farhad

    (Department of Management and Economics, Science and Research Branch, Islamic Azad University)

Abstract

Economic justice and equitable distribution of income, along with important issues such as economic growth and development, the reduction of inflation and unemployment, have always been of concern to economists. Fair distribution of income and reduction of income inequality in society, and the identification of factors affecting income inequality to make the right policy are necessary and obvious. The purpose of this paper is to examine the impact of income tax on income distribution in Iran. In this regard, Autoregressive Distributed Lag (ARDL) approach has been used to investigate the existence of a long-run relationship between variables and to estimate the coefficients related to long-run and error correction models for income inequality from 1978 to 2012. The results indicate a long-run relationship among the variables and show that an increase in income tax revenues leads to a reduction in income inequality.

Suggested Citation

  • Mollaesmaeili Dehshiri, Hassan & Pajouyan, Jamshid & Hosseini, Shamseddin & Ghaffari, Farhad, 2020. "Analyzing the Impact of Fiscal Policy (Income Tax) on Income Distribution in Iran by Autoregressive Distributed Lag (ARDL) Approach," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 15(2), pages 221-234, April.
    • Handle: RePEc:mbr:jmonec:v:15:y:2020:i:2:p:221-234
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    References listed on IDEAS

    as
    1. Palme, Marten, 1996. "Income distribution effects of the Swedish 1991 tax reform: An analysis of a microsimulation using generalized Kakwani decomposition," Journal of Policy Modeling, Elsevier, vol. 18(4), pages 419-443, August.
    2. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    3. Lars-Erik Borge & Jørn Rattsø, 2001. "Income Distribution and Tax Structure: Microeconomic Test of the Meltzer-Richard Hypothesis," CESifo Working Paper Series 543, CESifo.
    4. Adam, Antonis & Kammas, Pantelis & Lapatinas, Athanasios, 2015. "Income inequality and the tax structure: Evidence from developed and developing countries," Journal of Comparative Economics, Elsevier, vol. 43(1), pages 138-154.
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    More about this item

    Keywords

    Income Distribution; Gini Coefficient; Income Tax; ARDL.;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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