Paper Information

Journal:   IRANIAN JOURNAL OF TRADE STUDIES (IJTS)   SUMMER 2007 , Volume 11 , Number 43; Page(s) 283 To 322.
 
Paper: 

INVESTIGATING THE EFFECTS OF ECONOMIC POLICIES ON INCOME DISTRIBUTION IN IRAN

 
 
Author(s):  DAVOUDI P., BARATI M.A.*
 
* 
 
Abstract: 

This research presents an integrated macro-micro model of the Iranian economy. The model consists of a macroeconometric model component, connected through a set of linkage aggregate variables to a microeconomic model of household incomes.
We use this framework to predict the distributional consequences of alternative policy choices, based on household survey data for 1382 to 1390.Then, to get the aim of this research, we apply eight different kinds of alternative policy choices: the current trend of policy variables (such as fiscal and monetary variables) will continue, oil and direct and indirect tax incomes as fiscal policies will increase 10%, bank reserves and private sector credits as monetary policies will increase 10% and finally parallel exchange rate in fixed and floating exchange rate regimes as exchange rate policies will increase 10%.We then test the predictive performance of the model, by comparing its simulated results with the actual household survey data observed in 1381. We find that the integrated macro-micro econometric model can actually predict the broad pattern of the incidence of changes in household incomes across the distribution reasonably well. We find that increase of public incomes, including oil and taxes, lead to a decrease of inequality. GINI sensitivities to 10% increase in oil, direct and indirect tax incomes are about 0.01 %, 0.02% and 0.05% respectively. Increase of bank reserves and private sector credits lead to an increase of income inequality and GINI sensitivities to 10% increase in these variables are 0.02% and 0.04% respectively. And finally 10% increase of parallel exchange rate in fixed exchange rate regime leads to a decrease of income inequality about -0.9% and 10% increase in parallel exchange rate in floating exchange rate regime leads to an increase of income inequality about 0.38%.

 
Keyword(s): ECONOMIC POLICIES, INCOME DISTRIBUION, IRAN
 
References: 
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