THE POLITICAL ECONOMY OF POVERTY CYCLES IN IRAN

Abstract

1. LITERATURE

1.1. RESEARCH SUBJECT
Since the 1980s economists like Baumol (1986) and Abramovitz (1986) tried to examine the underlying reasons for income gap and convergence among different economies, in the 1990s, Barro and Sala-i-Martin (1990; 1991; 1992) developing the Neoclassic growth models of Solow (1956) and Swan (1956) intended to measure the speed of the income convergence among various economies. Adopting Neoclassic Beta and Sigma convergence models proposed by Barro and Sala-i-Martin and the 'club convergence' concept developed by Bamoul, this study examines the formation of convergence clubs, the existence of poverty cycles, and the effect of ethnic, religious and spatial features on these phenomena in Iran.
1.2. RESEARCH PURPOSE AND IMPORTANCE

This study aims to examine the existence of intragroup income convergence (club-convergence) and, the formation of poverty cycles and poverty traps in Iran. These groups consist of Fars-non Fars ethnic groups, Shia-Sunni religious groups, the population that lives in "non-oil" provinces, the population that lives in the border- non-border provinces.
1.3. CONTRIBUTION of the ARTICLE to the LITERATURE
This study investigating the existence of intragroup/club income convergence, poverty cycles, and the poverty trap in Iran, contributes to the related literature.
2. DESIGN AND METHOD

2.1. RESEARCH TYPE
A quantitative method adopted to find the relation between belonging to a group and the existence of poverty cycles and traps in Iran.

2.2. RESEARCH PROBLEMS
This study performed to explore if belonging to a politically dominant or minority ethnic or religious group, living in the center or border and being developed or less developed province affect the income and growth level.
2.3. DATA COLLECTION METHOD
The study uses statistics published by the Central Bank of Iran and the Statistical Center of Iran to regress different models. Examined periods are (a) 2000-2013, (b) 2000-2005 (Khatami era), (c) 2005-2013 (Ahmadinejad era), and (d) 2003-2007 (marked by high oil incomes).
2.4. QUANTITATIVE / QUALITATIVE ANALYSIS
Cross-sectional data and NLS method used to estimate different econometric models.

2.5. RESEARCH MODEL
The study uses Bata and Sigma convergence models developed by Solow and Swan in 1956 and Barro and Sala-i-Martin in the 1990s.
2.6. RESEARCH HYPOTHESES
First hypothesis: there was income convergence in the country as a whole during the examined periods.
Second hypothesis: In examined periods, poverty cycles and tarps did not form in different groups in Iran.
3. FINDINGS AND DISCUSSION
3.1. FINDINGS as a RESULT of ANALYSIS

(a) Contrary to the predictions of the neoclassical models there was not an income convergence in the country as a whole
(b) Contrary to the predictions of the neoclassical models, the neat immigration into provinces adversely affected income convergence.
(c) Ethnic and religious diversities adversely affected income convergence among the provinces of Iran.
(d) Contrary to the Neoclassical prediction, immigration contributed to the income per capita of the privileged provinces with Fars ethnic and Shia religious identity while exacerbated non-Fars and Sunni minorities welfare level.
(e) Results of the intra-group convergence estimation attest to the formation of vicious poverty cycles and underdevelopment traps in the Sunni, non-Fars, border and underdeveloped provinces.

3.2. HYPOTHESIS TEST RESULTS
The results reject primary hypotheses because:
a) There was not income convergence among provinces of Iran as a whole in all four examined periods.
b) There were vicious poverty cycles and traps in the Sunni, non-Fars, border and underdeveloped provinces.

3.3. DISCUSSING the FINDINGS with the LITERATURE
The results of the study are at odds with the predictions of Barro-Sala-i-Martin (1990; 1991; 1992), who state that market forces automatically decrease the income gap between different economies. Contrary to their predictions and in the same line with the findings of Shioji (2001) and Özgen et al. (2010), immigration worsened the income gap among provinces of Iran. Furthermore, as Baumol (1986) argues, differences in the structure of economies hinder income convergence paving the way for the club-convergence.
4. CONCLUSION, RECOMMENDATION AND LIMITATIONS
4.1. RESULTS of the ARTICLE
The findings of the research depict that ethnic and religious diversities adversely affected the income convergence among the provinces of Iran. Furthermore, contrary to the Neoclassical prediction, immigration contributed to the income per capita of the privileged provinces with Fars ethnic and Shia religious identity while exacerbated non-Fars and Sunni minorities welfare level. Finally, results of the intragroup convergence estimation attest to the formation of vicious poverty cycles and underdevelopment traps in the Sunni, non-Fars, border, and underdeveloped provinces.
4.2. SUGGESTIONS BASED on RESULTS
The results show that poverty cycles formed in the provinces populated by non-Fars and Sunni minorities who live in the border; so that, proper trade relationships with neighbour countries may help break the poverty vicious cycles and traps. Furthermore, the fair distribution of oil incomes and the development of the institutional conditions that eliminate rent-seeking can improve the income level of the less developed groups in Iran.
4.3. LIMITATIONS of the ARTICLE
This study did not include the effect of comprehensive sanctions exalted since 2010 due to limited statistics. Furthermore, the futures studies can focus on the effect of macroeconomic policies that did not include in this study due to limitations in the scope of the research.