The Role of Income Distribution in How Oil Revenues Affect Economic Growth: PSTR Approach

Document Type : Original Article

Authors

1 PhD Candidate in Economics, Faculty of Economics and Management, Urmia University, Urmia, Iran

2 Associate Professor of Economic, Faculty of Economics and Management, Urmia University, Urmia, Iran

3 Professor of Economic, Faculty of Economics and Management, Urmia University, Urmia, Iran

Abstract

The management of revenues from oil exports and its effects on economic growth is one of the challenges facing resource-based economies, including Iran. Empirical results from previous studies examining the impact of oil revenues on economic growth in oil-rich countries have raised many questions about why oil revenues have not generated the expected growth in some of these countries and, in some cases, have even hindered economic growth. Consequently, researchers have investigated the conditions of these countries to answer this question. Therefore, this study aims to examine the controversial question by assuming a nonlinear relationship between oil revenues and economic growth while considering the income distribution conditions of the countries. For this purpose, a panel smooth transition regression model has been used for eight oil-rich countries in the Persian Gulf during the period 2000 to 2023. The empirical results confirm the nonlinearity of this relationship and identify a threshold level of income inequality, emphasizing that if the level of inequality is below the threshold, oil revenues positively impact economic growth, whereas at higher levels of inequality, an increase in oil revenues leads to a decrease in economic growth.

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