The relationship between the shadow economy and income inequality in Iran, a self-explanatory vector approach with wide intervals

Subject Areas : Computational economics

Fariba Rashnoo ^{1 *} , Gholam Ali Haji ²

1 - Department of Economics, Faculty of Management, Islamic Azad University, Arak Branch, Iran
2 - Department of Economics, Faculty of Management, Azad Islamic University, Arak

Received: 2023-09-27 Accepted : 2023-12-26 Published : 2023-11-22

Keywords: Shadow Economy, , , , income inequality, , Gini coefficient, , long-term and short-term periods, , ARDL method,

Abstract :

One of the most important goals of governments in any economy is to control the income inequality situation, so that in every country, governments are trying to improve the conditions of income distribution according to the factors they have. One of the very important factors that affect income distribution is the shadow economy. As a factor that affects macroeconomic variables, the shadow economy also affects income distribution.Therefore, in this article, the impact of the size of the shadow economy on income inequality in the short and long term periods has been investigated using the panel data econometric method and in the period from 1366 to 1400 in Iran. The results show that the shadow economy has a positive effect (improvement of income distribution) on income distribution in the short term, but this effect is negative in the long term, in other words, the shadow economy has a negative effect on income distribution in the long term.