Analysis of the effects of financial inclusion on poverty and income inequality in Iran: An application of panel vector autoregression method with distribution intervals

Document Type : Original Article

Authors

1 Science and Research Branch of Azad Islamic university -Economic and Management Faculty-Tehran-Iran

2 member faculity of economic department - managment and economic college - science and reaserch branch - islamic azad university

3 Associate Professor, Department of Economics, Islamic Azad University, Science and Research Branch, Tehran, Iran

4 Associate Professor of Economics, Department of Management and Economic, Science and Research branch, Islamic Azad University, Tehran, Iran

10.48308/jem.2024.233494.1871

Abstract

In recent years, the issue of financial inclusion has been increasingly noticed and has been raised as an important socio-economic issue in the political agenda of many governments and international institutions. Increasing attention to this issue is due to a better understanding of its importance and place in economic development and its key role in poverty reduction and inclusive and sustainable development of societies. Therefore, in this study, the effects of financial inclusion on the poor and income inequality in 30 provinces of the country during the period of 2006-2020 have been investigated using the vector autoregression method with distribution breaks, fully modified ordinary least squares and vector error correction. The results of the estimation of the income inequality and poverty model show that financial inclusion in the long and short term has caused a decrease and an increase in the Gini coefficient (income inequality index) and the poverty census (poverty index), respectively. In such a way that in the long term, with the increase in the financial inclusion index, the Gini coefficient has decreased by 4.91 units and poverty by 0.20 units. It can be argued that the existence of a strong financial market with less risk encourages more investments. In addition to improving production and employment, this process improves income distribution and reduces poverty.

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Journal of Economics and Modelling
Volume 14, Issue 2 - Serial Number 54
September 2023
Pages 69-101

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