Journal of Applied Economics Studies in Iran

Journal of Applied Economics Studies in Iran

Spatial Analysis of the Interrelationship between Environmental Efficiency and Income Inequality in Iranian Provinces: An Application of the Simultaneous Spatial Equation Model (SSEM)

Document Type : Research Article

Authors
Somayeh Azami 1
Fatemeh Hosseini 2
1 Department of Economics, Faculty of Social Sciences and Education, Razi University, Kermanshah, Iran (Corresponding Author).
2 Department of Economics, Faculty of Social Sciences and Education, Razi University, Kermanshah, Iran.
10.22084/aes.2026.32565.3902
Abstract
Today, increasing greenhouse gas emissions and economic inequalities are key challenges facing policymakers. Understanding the dynamic relationship between these two challenges is important for achieving sustainable development goals. The aim of this study is to investigate the interrelationship between carbon efficiency and income inequality in Iranian provinces. For this purpose, the Simultaneous Spatial Equation Model (SSEM) is used. The SSEM allows the interrelationship between carbon efficiency and income inequality to be analyzed by considering the influence of provinces on one another and spatial spillover effects. First, the total factor carbon efficiency (TFCEE) of Iranian provinces is calculated for the period 2007–2018 using Data Envelopment Analysis (DEA). The results of the cointegration test indicate that there is a long-run relationship between the model variables in the carbon efficiency and income inequality equations. Additionally, the results of the Moran test confirm the spatial correlation in carbon efficiency and income inequality. The estimation of spatial simultaneous equations using the GS2SLS method shows that there is a reciprocal relationship between carbon efficiency and income inequality in middle- and low-income provinces. Reducing income inequality in low-income provinces (with an emphasis on the political economy perspective) and increasing income inequality in middle-income provinces (with an emphasis on consumption theory) lead to significant improvements in carbon efficiency. Improving carbon efficiency in middle- and low-income provinces leads to a significant reduction in income inequality. Policies aimed at improving carbon efficiency and increasing employment in middle- and low-income provinces, as well as industrialization across all income groups, can help reduce income inequality. To achieve sustainable development goals, such as improving income distribution and carbon efficiency, it is recommended that policymaking be adapted to the local conditions of the provinces, taking into account the interrelationships of these goals.
Keywords
Income Distribution
Spatial Econometrics
Data Envelopment Analysis
Total Factor Carbon Efficiency
Subjects
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Journal of Applied Economics Studies in Iran
Volume 15, Issue 58
Summer 2026
Pages 9-41