Income Inequality From an Islamic Perspective and Its Effects on Economic Growth of Iran
Authors
Abstract
A quick glance at the Islamic economic sources shows that reducing poverty and improving income distribution are among the most important economic goals of Islam and Subsequently, Islamic economics. On the other hand, the evaluation of the effects of income inequality on economic growth has been a point of focus for conventional economics scholars and also the Islamic economics researchers and hence, there are quite a few researches in this regards. Considering this, it seems important to shed some lights on the relation of the income inequality and economic growth in Iran as an Islamic developing country. Actually this question should be answered that has the income inequality of Iran decreased or increased the trend of economic growth in Iran? For answering this question, this paper evaluates the effects of the economic inequality on growth rate of Iran, after going over the topic in the framework of Islamic economics. For this sake, an endogenous growth model is specified, that includes human capital and technological progress. The generalized autoregressive conditional heteroskedasticity (GARCH) technique is used to estimate regression parameters. The results show that rising income ineq uality, which is measured by the Gini index and the ratio of income of the household at the 9th percentile to the household at the 1th percentile, would hinder economic growth in Iran. However, there is a positive relation between economic growth and the growth in employment, investment spending, technological progress, and human capital.
Keywords
)