The Threshold of Financial Development in the Relationship between Payment Facilities and Income Inequality; Emphasizing the Quality of Governance for Iran's Socio-Economic Policies (SDH)

Subject Areas : Journal of Iranian Social Development Studies

Mohammad Alipour Shalamani ¹ , mohamadali dehghantafti ² , Seyed Yahya Abtahi ³ , jalile totonchi ⁴

1 - Department of Economics, Yazd Branch, Islamic Azad University, Yazd, Iran
2 - Department of Economics, Yazd Branch, Islamic Azad University, Yazd, Iran
3 - Department of Economics, Yazd Branch, Islamic Azad University, Yazd, Iran
4 - Department of Economics, Yazd Branch, Islamic Azad University, Yazd, Iran

Received: 2024-12-24 Accepted : 2025-02-06 Published : 2025-05-04

Keywords: Payment facilities, income inequality, financial development, quality of governance, threshold approach,

Abstract :

In the present study, the effects of the financial development threshold on the relationship between payment facilities and income inequality were investigated, with an emphasis on the quality of governance for socio-economic policies (SDH) during the period 1365-1402 and using the Soft Transition Threshold (STAR) approach. The results of the linear part of the model indicate that the variable of bank payment facilities and the level of education have a negative relationship with the income inequality index. The results of the nonlinear part of the model also indicate a negative relationship between the variables of bank payment facilities, credit granted to the private sector to GDP, quality of regulations, development of new technology, level of education and foreign direct investment with the income inequality index. But there is a point, the confirmation of the nonlinear theory of Greenwood and Joannavis and the inverted (U)-shaped relationship between financial development and income distribution, which is positive and significant in the linear regime, and by passing the threshold (-0.45) and moving to the nonlinear regime, the effect of credits granted to the private sector to GDP on income distribution inequality becomes negative. The main channel of the impact of financial development is through increasing the efficiency of banks' payment facilities, controlling inflation, and the quality of regulations. Therefore, the manner of liberalization of financial markets, the weakness of financial system management, and the lack of formation of coherent financial markets and benefiting from regulations in the country can be considered as the reasons for the reduction in investment efficiency through non-optimal allocation of resources in the country. As a result, more attention and effort should be paid in the country to develop and make financial markets more efficient, and as a result, allocate resources more efficiently and increase investment efficiency.

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