Regional Inequality in Iran and the Impact of Economic Factors: A Spatial Econometric Approach


1 Faculty of Economics and Administrative Sciences, University of Mazandaran, Mazandaran, Babolsar, Iran

2 Faculty of Economics and Social Sciences, Bu-Ali Sina University, Hamedan, Iran



egional unbalanced growth and the factors affecting it are one of the most important economic issues in developing countries. In this research, after evaluating the regional inequality at the provincial level of Iran, in order to examine the effect of economic factors on it, it was considered as a spatial econometric model using panel data during the period of 2001 to 2015. The evaluation of Theil inequality indices and Population-Weighted Coefficient of Variation (PW-CV) shows that Iranian provinces are extremely unequal. The results of the estimation of the research model indicate the spatial dependence among the provinces. So that the regional inequality index of each province is affected by neighboring provinces with a coefficient of 34%. In the analysis of economic factors affecting regional inequality; the increase of foreign direct investment and the ratio of industrial production, reduce the inequality of the provinces. But increased provincial spending will increase regional inequality and the tax policy has failed to succeed in redistributing revenue. The results of the study of the direct and indirect effects of explanatory variables on the PW-CV shows that regional inequality is mainly influenced by direct effects, and the effect of the total coefficients on the inequality index is significant.


Akbari, N., Farahmand, Sh., & Jamali, S. (2011). Spatial Analysis of the Effect of Government Financial Policies on Inequality of Income in Iran with the Approach of Geographical Weight Regression. Quantitative Economics Quarterly (Ex-economic Studies), 8(3), 1-25.
Anselin, L., Le Gallo, J., & Jayet, H. (2008). Spatial Panel Econometrics. Berlin: Springer.
Baltagi, B., Egger, P., & Pfaffermayr, M. (2013). A Generalized Spatial Panel Data Model with Random Effects. Econometric Reviews, 32, 650-685.
Brros, C. P., & Gupta, R. (2017). Development, Poverty and Inequality: A Spatial Analysis of South African Provinces. The Journal of Developing Areas, 51(1), 19-32.
Capello, R. (2015). Regional Economics. Abingdon: Routledge.
Dadashpor, H., Alizadeh, B., & Madani, B. (2011). Investigating and Analyzing the Trend of Development and Spatial Inequalities in West Azarbayejan Province. Journal of Social Sciences, 53, 173-208.
Elhorst, J. P. (2014). Spatial Econometrics; From Cross- Sectional Data to Spatial Panels. London: Springer.
Ezcurra, R., & Rodriguez, A. (2013). Does Economic Globalization affect Regional Inequality? A Cross-country Analysis. World Development, 52, 92-103.
Ficher, M., & Getis, A. (2010). Handbook of Applied Spatial Analysis. New York: Springer.
Kamali, S., & Shafiei, S. (2011). Investigating the Factors Affecting the Income Distribution in Iran's Economy with Emphasis on Taxes. Tax Research Journal, 58, 121-142.
Kanbur, R., & Venables, A. J. (2005). Spatial Inequality and Development. Oxford: Oxford University Press.
Karimi Moghari, Z., & Barati, J. (2017). Determining the Level of Regional Inequality in Iran's Provinces: Multi-dimensional Composite Index Analysis. Quarterly Journal of Economic Growth and Development Studies, 7(26), 49-70.
Khalesi, G., & Piraei, Kh. (2014). Relationship between Economic Growth and Income Inequality Iran's Provinces. Quarterly Journal of Economic Research, 16(2), 155-171.
Kutner, M. H., Nachtsheim. C. J., & Neter. J. (2004). Applied Linear Regression Models. New York: McGraw Hill.
Kuznets, S. (1995). Economic Growth and Income Inequality. American Economic Review, 45, 1-28.
Lasage, J., & Pace, K. (2013). Introduction to Spatial Econometrics (E. Jalaie, & A. Jamshidnezhad, Trans.). Tehran: Nour-e-elm Press.
Li, G., & Fang, C. (2013). Analyzing the Multi-Mechanism of Regional Inequality in China. The Annals of Regional Science, 52(1), 155-182.
Liao, F. H., & Wei, Y. D. (2015). Space, Scale, and Regional Inequality in Provincial China: A Spatial Filtering Approach. Applied Geography, 61, 94-104.
Lin, C-H. A., Lahiri, S., & Hsu, C-Po. (2014). Population Aging and Regional Income Inequality in Taiwan: A Spatial Dimension. Social Indicators Research, 122(3), 757-777.
Lotfi, S., & Shabani, M. (2013). Integrated Model for Ranking Regional Development of Case Study: Mazandaran Province Hospital. Journal of Applied Geosciences Research, 28, 7-30.
Mahmodzadeh, M., & Elmi, Z. (2012). Inequality and Economic Growth in Iran's Provinces. Quarterly Journal of Economic Research and Policy, 64, 7-30.
McCombie, J. S. L., Spreafico M. R. M., & Xu. S. (2015). Productivity Growth, Spatial Inequality and Returns to Scale: The Case of the Cities of the Province of Jiangsu, China. University of Cambridge and is at the Institute of Economic Policy, Retrieved from
Mehrara, M., & Mojtaba, M. (2015). Investigating the Factors Affecting the Income Distribution in Iran with the Biosynthesis Econometric Approach. Iranian Economic Research Quarterly, 61, 83-116.
Mehregan, N., Fotros, M. M., Gholizadeh, A., & Teimori, Y. (2016). Estimation of Spatial Focus of Industry and Its Effective Factors on Iran's Provinces. Quarterly Journal of Economic Modeling Research, 24, 8-40.
Mendoza, V. (2016). Preferential Ppolicies and Income Inequality: Evidence from Special Economic Zones and Open Cities in China. China Economic Review, 40, 228-240.
Millo, G., & Piras. G. (2012). Splm: Spatial Panel Data Models in R. Journal of Statistical Software, 47(1),244-268.
Millo, G. (2014). Maximum Likelihood Estimation of Spatially and Serially Correlated Panels with Random Effects. Computational Statistics and Data Analysis, 71, 914-933.
Montmartin, B., & Herrera, M. (2014). Internal and External Effects of R&D Subsidies and Fiscal Incentives: Empirical Evidence Using Spatial Dynamic Panel Models. Research policy, 44(5), 1065-1079.
Mortazavi, S. A., Serajzadeh, F., & Shokohi, M. (2011). Study of the Relationship between Income Inequality and Economic Growth in Urban and Rural Areas of the Country: Application of the Kuznets Curve. Agricultural Economics Research, 3(1), 165-180.
Mosavi Jahromi, y., Khodadad kashi, F., & Mosapor Ahmad, A. (2013). Assessing the Effective Factors on Income Inequality in the Community. Iranian Economic Research Quarterly, 19(61), 117-147.
Najafi Alamdarlo, H., Mortazavi, A., & Shemshadi Yazdi, K. (2011). Application of Spatial Econometrics in Investigating Factors Affecting Export of Agricultural Products in ECO Countries: Approach to Panel Data. Quarterly Journal of Economic Research, 13(3), 49-62.
Raghfar, H., Khoshdast, F., & Yazdanpanah, M. (2011). Measuring Income Inequality in Iran during 1981 and 2010. Social Welfare Quarterly, 45, 241-266.
Seif, A. M., Panahi, H., & Hamidi Razi, D. (2017). Regional Economic Growth and Spatial Spillover Effects in MENA Area. Iranian Economic Review, 21(4), 765-787.
Sharma, K. (2003). Trade Policy, Growth and Poverty in Asian Developing Countries. London: Routledge.
Song, Y. (2013). Rising Chinese Regional Income Inequality: The Role of Fiscal Decentralization. China Economic Review, 23, 294-309.
Wright, M. (2015). Economic Inequality and the Social Capital Gap in the United States across Time and Space. Political Studies, 63, 642-662.