Examining the Impact of Macroeconomic Uncertainty on Income Inequality in Iran

Articles in Press

Document Type : Research Paper

Authors

Department of Economic Sciences, Faculty of Humanities and Social Sciences, University of Kurdistan, Sanandaj, Iran.

10.22103/jdc.2025.24671.1528

Abstract

Objective: The main goal of this study is to examine the impact of macroeconomic uncertainty on income inequality in Iran.
 
Method: The study period spans from 1990 to 2020 in Iran, using the Fully Modified Ordinary Least Squares (FMOLS) approach. Econometrics offers various methods to explore the long-term relationship between variables; this research employs the fully modified cointegration method.
 
Results: The results indicate that macroeconomic uncertainty has a positive and significant effect on income inequality, leading to its increase. Additionally, economic growth, political risk, and the openness of trade have positive and significant impacts on income inequality and contribute to its rise. Conversely, economic sanctions and oil uncertainty have negative and significant effects on income inequality, leading to its reduction.
 
Conclusion: Macroeconomic uncertainty leads to increased economic fluctuations, higher exchange rates, rising inflation, depreciation of the national currency, increased unemployment, and other issues, ultimately decreasing individuals' income and purchasing power. In this context, poor and low-income individuals become more vulnerable compared to wealthy ones. Therefore, governments should reduce economic volatility and shocks, maintain currency stability, control inflation and exchange rate fluctuations, promote employment, support private sector investment, and cut current expenditures. Besides maintaining macroeconomic stability, these measures would aid in more equitable income distribution and reduce income inequality.

Keywords

Main Subjects

References

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  • Receive Date: 12 January 2025
  • Revise Date: 04 May 2025
  • Accept Date: 28 May 2025

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