Oil Booms and Inequality in Iran

30 Pages Posted: 25 Apr 2019

See all articles by Mohammad Reza Farzanegan

Mohammad Reza Farzanegan

University of Marburg - Center for Near and Middle Eastern Studies (CNMS)

Tim Krieger

University of Freiburg - Department of Economics

Date Written: May 2019

Abstract

We study the response of income inequality to positive per capita oil and gas revenue shocks in Iran. Using historical data from 1973 to 2016 and vector autoregression (VAR) as well as vector error correction (VECM) model‐based impulse‐response functions, we find a positive and statistically significant response of income inequality to oil booms. We also explore possible channels through which oil booms may increase inequality, including private sector credit growth, construction investment, international trade (imports) and real economic output. We find that following an oil boom, higher imports, private sector credit growth, and real economic output can explain the increased income gap to a certain degree in Iran's oil‐based economy. Our analysis can help policymakers evaluate and accommodate the possible positive or negative effects of inequality in Iran resulting from the 2016 lifting of the embargo against the country.

Suggested Citation

Farzanegan, Mohammad Reza and Krieger, Tim, Oil Booms and Inequality in Iran (May 2019). Review of Development Economics, Vol. 23, Issue 2, pp. 830-859, 2019, Available at SSRN: https://ssrn.com/abstract=3376853 or http://dx.doi.org/10.1111/rode.12569

Mohammad Reza Farzanegan (Contact Author)

University of Marburg - Center for Near and Middle Eastern Studies (CNMS) ( email )

Deutschhausstra├če 12
Marburg, 35037
Germany

HOME PAGE: http://www.uni-marburg.de/cnms/wirtschaft

Tim Krieger

University of Freiburg - Department of Economics ( email )

University of Freiburg
Wilhelmstr. 1b
Freiburg, D-79085
Germany

HOME PAGE: http://www.wguth.uni-freiburg.de

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