The Determinants of Gini Coefficient in Iran Based on Bayesian Model Averaging

• Main Authors: Mohsen Mehrara, Mojtaba Mohammadian
• Format: Article
• Language: English
• Published: Faculty of Economic Sciences, Hyperion University, Bucharest, Romania 2015-03-01
• Series: Hyperion Economic Journal
• Subjects: Gini coefficient; Bayesian Model Averaging (BMA)
• Online Access: http://hej.hyperion.ro/articles/1(3)_2015/HEJ%20nr1(3)_2015_A1Rezaei.pdf

This paper has tried to apply BMA approach in order to investigate important influential variables on Gini coefficient in Iran over the period 1976-2010. The results indicate that the GDP growth is the most important variable affecting the Gini coefficient and has a positive influence on it. Also the second and third effective variables on Gini coefficient are respectively the ratio of government current expenditure to GDP and the ratio of oil revenue to GDP which lead to an increase in inequality. This result is corresponding with rentier state theory in Iran economy. Injection of massive oil revenue to Iran's economy and its high share of the state budget leads to inefficient government spending and an increase in rent-seeking activities in the country. Economic growth is possibly a result of oil revenue in Iran economy which has caused inequality in distribution of income.