The resource curse and income inequality in Iran

This paper has investigated the relationship between oil revenues and inequality in Iran from 1969 to 2012. For this purpose, a threshold regression model has been used for capturing the non-linearity impact of the share of oil revenues in GDP on inequality. Two indicators have been applied for inequality: “Gini coefficient” and “the share of the richest decile of household expenditures which were relative to the poorest decile”. Estimation results of both inequality models suggested that there is a non-linear relationship as a u-shape between “oil revenues/GDP” and inequality in two regimes of oil revenues including high and low oil revenues regimes. The threshold level of oil revenues divided by GDP was about 10% for both inequality models. Before this threshold value, in low oil revenues regime, an increase of oil revenues would decrease income inequality, but after the threshold level and staying in high oil revenues regime, a rise in oil revenues would increase income inequality in Iran.