Financial markets are the head of economic systems and the center of decision-making. If these markets face failure, functioning of the economic system will suffer as a whole. This study investigates the long-run relationship (threshold co-integration) of financial development with income inequality in the Iran’s economy for the period 1971 to 2011. The results indicate that there is threshold co-integration among the variables and the results of TVAR.LR test show that the model has only one threshold. Also, the results suggest that financial market development increases income inequality till a particular threshold value. After this, threshold value decreases income inequality. A threshold of financial development is necessary to reduce income inequality. Also, speeds of adjustment before and after threshold value are 41% and 80% respectively. The adjustment speed will increase after reaching the threshold value and in each period 80 percent of non-equilibrium is adjusted in the next period after threshold value.
z, M., h, A., & a, E. (2014). Financial Development and Income Inequality in Iran’s Economy: Non-linear Error Correction Approach. Journal of Applied Economics Studies in Iran, 3(11), 27-47.
MLA
m z; a h; e a. "Financial Development and Income Inequality in Iran’s Economy: Non-linear Error Correction Approach". Journal of Applied Economics Studies in Iran, 3, 11, 2014, 27-47.
HARVARD
z, M., h, A., a, E. (2014). 'Financial Development and Income Inequality in Iran’s Economy: Non-linear Error Correction Approach', Journal of Applied Economics Studies in Iran, 3(11), pp. 27-47.
VANCOUVER
z, M., h, A., a, E. Financial Development and Income Inequality in Iran’s Economy: Non-linear Error Correction Approach. Journal of Applied Economics Studies in Iran, 2014; 3(11): 27-47.
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