Mobility and the Dynamics of Poverty in Iran: Evidence from the 1992–1995 Panel Survey

Abstract

In the last three decades, revolutionary Iran has experienced large shocks to its political and economic system with likely effects on poverty, inequality, and economic mobility. While poverty has declined, inequality has remained relatively high and stable over nearly four decades. In this paper, for the first time, we examine poverty and inequality in a dynamic context using a 4-year panel data, collected during 1992–1995. We show that short-term income mobility is relatively high, which helps mitigate persistent high inequality. We offer a range of estimates of transition probabilities, indicating that, for example, someone in the lowest (highest) quintile has between 25% and 50% chance of moving up (down) the income ladder. Focusing on the dynamics of poverty, we distinguish between short- and long-term poor and between chronic and transient poverty. Surprisingly, we find that chronic poverty is a more serious problem in urban than rural areas, while transient poverty is geographically more uniformly distributed. Finally, using Tobit and quantile regression, we examine the correlates of these two types of poverty. Both chronic and transient poverty are higher for households headed by women and by younger and less educated men. While minorities suffer more from transient poverty, they are less likely to be chronically poor. We discuss the implications of these findings for policy to alleviate chronic and transient poverty.

Keywords: Iran, Poverty, Mobility, Income distribution, Panel data

JEL Classification: D31, D63, I32, O15