Financial Development and Inequality: Comparing Developed, Less Developed and Undeveloped Provinces in Iran

Subject Areas : Regional Planning

mahdieh rezagholizadeh ¹ , majid aghaei ²

1 - عضو هیات علمی دانشگاه مازندران
2 - دانشگاه مازندران

Received: 2017-09-10 Accepted : 2019-03-20 Published : 2019-04-21

Keywords: financial development, income distribution, generalized method of moment(GMM),

Abstract :

Considering the importance of financial development in reducing inequality based on the economic literature , importance of income distribution and fair division of resource and facilities between various social groups and elimination of inequality in Iran’s provinces, this study investigates the relationship between financial development and income distribution in Iran’s provinces, based on the dynamic panel models and using Generalized Method of Moment(GMM) estimator in the time period of 2006 - 2015. The underlying provinces are divided into three groups as developed, less developed and undeveloped based on the index of Ministry of Industry, Mining and Trade.
The results indicate that there is a negative and linear relationship between financial development and inequality in all groups of provinces, so it can be said that the higher level of financial development reduces inequality. It should be noted that the impact of financial development on reducing inequality in provinces has an inverse relationship with their development level so that this effect in undeveloped provinces is more than two other groups. On the other hand, results show that there are not enough evidences supporting the non-linear inverted U-shaped hypothesis between financial development and inequality in Iran’s provinces in the period of study.

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