Investigating the Asymmetric Effects of Open Economy Indicators on the Gini Coefficient of Income Deciles in Iran

Document Type : Research Article

Author

Assistant Professor, Economics Department, Faculty of Economics and Management, University of Sistan and Baluchestan, Zahedan, Iran.

Abstract

The purpose of this article is to analyze the impact of open economy indicators including economic openness and foreign direct investment on income distribution in Iran during the years 1996 to 2018. For this purpose, we use fuzzy regression with asymmetric coefficients. The reason for using it is very high flexibility in analysis. For each income decile, an optimal model is estimated that shows the effect of open economy indicators on the Gini coefficient of income deciles. The results show that the average effect of foreign direct investment on the Gini coefficient of income deciles is zero or very small and reduces inequality. But the maximum impact of foreign direct investment on the Gini coefficient of income deciles has increased, which leads to inequality in income distribution. This is due to the lack of appropriate programs and policies in the economy, so that we can use the opportunity of foreign direct investment to reduce inequality. Also, the results show that the maximum effect of the degree of economic openness on the Gini coefficient of income deciles is zero, which means that the degree of economic openness does not increase inequality. In order to strengthen or weaken foreign relations. Therefore, the amount of subsidy paid to each of the income deciles provides the infrastructure needed to attract foreign investment and provides measures for the treasury to tax the income deciles.

Keywords

Main Subjects

References

- Akmal, M. S., (2007). “Stock returns and inflation: An ARDL econometric investigation utilizing Pakistani data”. Pakistan economic and social review, 89-105. https://www.sid.ir/paper/621846/en
- Angeles-Castro, G., (2011). “The effect of trade and foreign direct investment on inequality: Do Governance and Macroeconomic Stability Matter?”. Economía Mexicana, Nueva Época, 20(1): 181-219.‏ https://www.redalyc.org/pdf/323/32319280005.pdf
- Asai, H. T. S. U. K.; Tanaka, S. & Uegima, K., (1982). “Linear regression analysis with fuzzy model”. IEEE Trans. Systems Man Cybern, 12: 903-907. https://ieeexplore.ieee.org/stamp/stamp.jsp?arnumber=4308925
- Babazadeh, M.; Qavidel, S. & Amouzad Khalili, H., (2010). “Foreign Trade and Income Distribution: the case of Iran 1977-2007”. Applied Economics, 1(2): 161-186. DOI: 10.22034/BS.2022.537979.2375
- Basu, P. & Guariglia, A., (2007). “Foreign direct investment, inequality, and growth”. Journal of Macroeconomics, 29(4): 824-839.‏ DOI: https://doi.org/10.1016/j.jmacro.2006.02.004
- Bhagwati, J. & Srinivasan, T. N., (2002). “Trade and poverty in the poor countries”. American Economic Review, 92(2): 180-183.‏ DOI: 10.1257/000282802320189212
- Bhagwati, J. & Srinivasan, T. N., (2002).‏ “Trade and poverty in the poor countries”. American Economic Review, 92(2): 180-183. DOI: 10.1257/000282802320189212
- Champernowne, D. G., (1974). “A comparison of measures of inequality of income distribution”. The Economic Journal, 84(336): 787-816.‏ https://doi.org/10.2307/2230566
- Chintrakarn, P.; Herzer, D. & Nunnenkamp, P., (2012).” FDI and income inequality: Evidence from a panel of US states”. Economic inquiry, 50(3): 788-801.‏ https://doi.org/10.2307/2230566
- Draeseke, R. & Giles, D. E., (2002).  “A fuzzy logic approach to modelling the New Zealand underground economy”. Mathematics and computers in simulation, 59(1-3): 115-123.‏ https://doi.org/10.1016/S0378-4754(01)00399-8
- Easterly, W. & Fischer, S., (1999). Inflation and the Poor. The World Bank.‏
- Feenstra, R. C. & Hanson, G., (1997). “Foreign direct investment and alternative wages; evidence from Mexico’s maquiladoras”. Journal of International Economics, 42(3/4): 371-393. https://doi.org/10.1016/S0022-1996(96)01475-4
- Ganjoei, R. A.; Akbarifard, H.; Mashinchi, M. & Esfandabadi, S. A. M. J., (2020). Estimation of upper and lower bounds of Gini coefficient by fuzzy data. Data in Brief, 105288.
- Ganjoei, R. A.; Akbarifard, H.; Mashinchi, M. & Esfandabadi, S. A. M. J., (2020). A method for estimating width bands of variables in economics under uncertainty conditions. Methods, X, 101184.‏
- Gemmell, N.; Kneller, R. & Sanz, I., (2008).  “Foreign Investment, International Trade and the Size and Structure of Public Expenditures”. European Journal of Political Economy, 24(1): 151-171. https://doi.org/10.1016/j.ejpoleco.2007.06.004
- Georgiou, M. N., (2010). Income Distribution and Inflation: An Empirical Analysis for Western Europe (1995-2006). Available at SSRN 1542696.‏
- Gini, C., (1912). Variabilita' e Mutabilita, Studio economic ogiuridici, Universita di Cagliari Anno III. Parte 2a, Reprinted in C: 211-382.
- Gundlach, E. & De Vaal, A., (2010). Look before you leap: the economics of free trade and income redistribution (No. 1583). Kiel Working Paper.‏
- John, R. I. & Innocent, P. R., (2005). “Modeling uncertainty in clinical diagnosis using fuzzy logic”. IEEE Transactions on Systems, Man, and Cybernetics, Part B (Cybernetics), 35(6): 1340-1350.‏ DOI: 10.1109/TSMCB.2005.855588
- Lazear, E. P., (2014).  “Performance pay and productivity”. American Economic Review, 90(5): 1346-1361. https://www.jstor.org/stable/2677854
- Lim, G. C. & McNelis, P. D., (2012).  Income inequality. trade and financial openness.‏
- Lindström, T., (1998). “A fuzzy design of the willingness to invest in Sweden”. Journal of economic behavior & organization, 36(1): 1-17. https://doi.org/10.1016/S0167-2681(98)00067-5
- Meschi, E. & Vivarelli, M., (2009). “Trade and income inequality in developing countries”. World development, 37(2): 287-302.‏ https://doi.org/10.1016/j.worlddev.2008.06.002
- Minhas, B., (1962). “The homohypallagic production function, factor intensity reversals, and the Heckscher-Ohlin theorem”. Journal of Political Economy, 70(2): 138-156.  https://www.jstor.org/stable/1861811
- Muellbauer, J., (1974). “Inequality measures, prices and household composition”. The Review of Economic Studies, 41(4): 493-504. https://www.jstor.org/stable/2296699
- Nawazish, A., (1998).  “Globalization, its impact on the economies of OIC countries and the role of the private sector”. Journal of Economic Cooperation among Islamic Countries, 19: 1-2. https://jecd.sesric.org/pdf.php?file=ART97100106-2.pdf
- Nixson, F. & Walters, B., (2006). “Privatization, income distribution, and poverty: the Mongolian experience”. World Development, 34(9): 1557-1579.‏ https://doi.org/10.1016/j.worlddev.2005.12.007
- Ravallion, M., (2007).  “Looking beyond averages in the trade and poverty debate”. In: The Impact of Globalization on the World’s Poor (pp: 118-144): Palgrave Macmillan, London.‏
Salvatore, D., (2007). “Growth, International Inequalities and Poverty in a Globalizing World”. Journal of Policy Modeling, 29: 635-641. https://ideas.repec.org/a/eee/jpolmo/v29y2007i4p635-641.html
- Stępień, E. (2009).  “The Impact of International Trade and Foreign Competition on Labour Earnings in Poland. Ekonomia”. Rynek, Gospodarka, Społeczeństwo, (24): 39-60.‏ https://ideas.repec.org/a/eko/ekoeko/24_39.html
- Tsai, P. L. & Huang, C. H., (2007). “Openness, Growth and Poverty: The Case of Taiwan”. World Development, 35: 1858-1871. https://doi.org/10.1016/j.worlddev.2006.11.013
- Zadeh, L. A., & Zadeh, L. A. (2012). What is computing with words (CWW)?. Computing with Words: Principal Concepts and Ideas, 3-37. https://link.springer.com/chapter/10.1007/978-3-642-27473-2_1
Journal of Applied Economics Studies in Iran
Volume 12, Issue 48
January 2024
Pages 223-261

Files

Share

How to cite

Statistics