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The response of income inequality to positive oil rents shocks in Iran: Implications for the post-sanction period

Mohammad Reza Farzanegan () and Tim Krieger

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: We study the short and long run responses of income inequality to the positive oil and gas rents per capita shocks in Iran from 1973 to 2012. Using vector autoregression (VAR)-based impulse response functions, we find a positive and statistically significant response of income inequality to oil rents booms within 4 years after the shock. The Autoregressive-Distributed Lag (ARDL) results show that a 10 percent increase in oil and gas rents per capita leads to 1.1 percent increase in income inequality in the long run. The results are robust after controlling for income-distribution channels in Iran. Our analysis can help policy makers to evaluate and accommodate the possible positive or negative effects of lifting sanctions on inequalities in Iran.

Keywords: oil rents; inequality; VAR; ARDL; sanctions; Iran (search for similar items in EconPapers)
JEL-codes: Q33 Q38 D63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ara, nep-cwa, nep-ene and nep-lma
Date: 2017
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