Assessing the Impact of Credit Policy on Income Inequality in Rural Areas of Iran

Document Type : Research Paper

Author

Assistant Professor ,Department of Rural Development ,college of Agriculture,, Isfahan University of Technology,Isfahan,iran.

Abstract

Increasing inequality and concentration of incomes in the upper-income classes is the main reason for the decline in living standards of people in the lower-income classes. Therefore, adopting policies to combat rising inequality in income distribution will be directly related to reducing the spread of poverty in poorer communities and low-income groups. In this study, the effect of credit policy on income inequality in rural areas of Iran was evaluated using the approach of the autoregressive distributed lag model (ARDL) and time series data from 1986-2018. The results showed that the implementation of credit policy has had a significant effect on reducing income inequalities in rural areas in the short and long run. Also, the results showed that increasing the real capital stock of the agricultural sector and increasing the share of income from rural living costs reduces income inequalities in rural areas in Iran. However, the real growth of the agricultural sector and subsidies for agricultural items were recognized as factors in increasing income inequality in rural areas of Iran. Finally, in order to reduce income inequality in rural areas of the country, pursuing and continuing the implementation of credit policy due to its sustainable and long-run effects on reducing inequality in rural income distribution in the country is the first policy recommendation in this study. In addition, facilitating capital increase processes in the agricultural sector with a focus on micro-beneficiaries is another policy recommendation in this study that can facilitate the implementation of credit policy by supporting the receipt of credit for micro-owners.

Keywords

References

Ahmadi, A. M. Mehregan, N. (2006). the impact of economic adjustment policies on income distribution in Iran. Journal of Economic Research (Tahghighat-E-Eghtesadi). 40(3): 209-232. (In Persian)
Bagherzadeh, A. Komijani, A. (2010). The analysis of the domestic and international R&D impact of agricultural TFP in Iran. Quartery Journal of Economical Modeling. 4(11): 93-119. (In Persian)
Baoosh, M. Shiani, M. Mousaei, M. (2018). Analysis of Socio-economic Factors Affecting Poverty and Health Inequalities During the Years 2011-2015. Social Welfare Quarterly. 17(67): 71-108
Chang, K. Zeng, Y. Wang, W. Wu, X. (2019). The effects of credit policy and financial constraints on tangible and research & development investment: Firm-level evidence from China's renewable energy industry. Energy Policy. 130: 438-447.
Dong, F. Liu, J. Featherstone, A. (2010). Effects of credit constraints on productivity and rural household income in China. CARD Working Papers. 507.
Engle RF. Granger CW. (1987). Co-integration and error correction: representation, estimation, and testing. Econometrica, Journal of the Econometric Society. 251-76.
Farahanifard, S. Feshari, M. Khanzadeh, Y. (2016). The impact of islamic banking and non-banking financial institutions on economic growth in Iran – a generalized method of moments (GMM). Quartery Journal of Economical Modeling. 9(31): 21-41. (In Persian)
Fatthi Aghababa, M. Azizi, KH. Mahmmodzade, M. (2020). The impact of bank facilities in different areas of economy on the growth of the added values in industry, services, agriculture, building construction and housing. Quarterly Journal of Economical Modeling. 14(50): 77-102.
(In Persian)
Hartarska, V. Nadolnyak, D. Shen, X. (2015). Agricultural credit and economic growth in rural areas. Agricultural Finance Review. 75(3) 302-312.
Hoshmand, M. Daneshnia, M. (2012). Impact of Financial Development on Economic Growth in Iran. Journal of Monetary & Financial Economics. 18(2): 45-61. (In Persian)
Jaberi Khosroshahi, N. Mohamadvand Nahidi, M. R. Noroozi, D. (2012). The effect of financial development on income inequality in Iran. Iranian Journal of Economic Growth and Development research. 2(6): 173-208.
Johansen, S. Juselius, K. (1994). Identification of the long-run and the short-run structure an application to the ISLM model. Journal of Econometrics. 7-36.
Karagiannaki, E. (2017). The empirical relationship between income poverty and income inequality in rich and middle income countries. Working Paper. Centre for Analysis of Social Exclusion; London School of Economics.
Karbasi, A. R. Rastegaripour, F. (2008). Investigating the factors affecting farm size distribution in Iran. Agricultural Economics. 2(3): 183-195.
(In Persian)
Khaledi, K. Sadralashrafi, S. M. (2005). Investigating the interrelationship between economic growth in agriculture and income distribution in rural areas of Iran. Agricultural Science. 11(2): 25-39. (In Persian)
Khan, M. K. Teng, J. Z. H. Khan, M.I. (2019). Cointegration between macroeconomic factors and the exchange rate USD/CNY. Financial Innovation. 5(5): 1-15.
Mohsani, H. Shahiki Tash, M. N. Pahlavani, M. Mirjalili, H. (2019). The effect of credit easing policy on macroeconomic variables in Iran. Quarterly Journal of Applied Economics Studies in Iran.8(31): 67-93. (In Persian)
Pesaran, M. H. Shin, Y. (1999). An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis. In S. Strom, (ed) Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, Cambridge University Press, Cambridge.
Pesaran, M. H. Shin, Y. Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Economics. 16(3): 289–326.
Pishbahar, E. Pakzad, B. Ghahremanzadeh, M. Survey of the interaction relationship between rural income inequality and agricultural sector growth in Iran: using Panel-VAR. Agricultural Economics. 13(4): 19-54. (In Persian)
Rezagholizadeh, M. Aghaei, M. (2015). Investigating the effect of direct tax on the income distribution in Iran. Majlis & Rahbord. 22(84): 129-156. (In Persian)
Rosida, L. (2018). Rural and urban poverty in developing countries. Media Bina Ilmiah. 13(1): 835-844.
Seyfipour, R. Aminrashti, N. Navabizand, K. (2019). Investigating the effects of microcredit policy on income distribution index by provinces. Quarterly Journal of Financial Economics. 12(45): 127-146.
(In Persian)
Shahnazi, R. Shahsavar, M. R. Mobasheri, M. H. (2014). Income Distribution and Households' Welfare before and after Subsidies Targeting. Social Welfare Quarterly. 14 (54) :167-199. (In Persian)
Sharifi Renani, H. Tavakoli, A. Honarvar, N. (2013.). Effect of Agricultural Credit Banks on the Value Added of Agricultural Sector in Iran. Journal of Agricultural Economics and Development. 21(84): 201-227. (In Persian)
Tousi, A. Ghasemi, A. Dehghan Shourkand, H. (2019). Criticisms of current financial and trade policies to support Iranian products in selected sectors. Critical Studies in Texts and Programs of Human Sciences. 9(61): 219-245. (In Persian)
Twumasi, M. A. Jiang, Y. Ameyaw, B. Danquah, F. O. Acheampong, M. O. (2020). The impact of credit accessibility on rural households clean cooking energy consumption: The case of Ghana. Energy Reports. 6: 974-983.
Yasharel, S. Habibian Naghibi, M. (2016). Analyzing the impacts of targeted subsidies on income distribution and poverty in Iran: a general equilibrium model of labor supply. The Journal of Economic Modeling Research. 6(23) :159-196. (In Persian)
Zhai, P. Ma, R. (2017). Does ownership structure affect trade credit policy in small- and medium-sized firms? Evidence from China. Essays on Economic Policy. 35(83): 130-138. (In Spanish)

Files

Share

How to cite

Statistics