Document Type : Research Paper
Authors
1 PhD in Economics, Semnan University, Semnan, Iran
2 Professor of Econometrics and Social Statistics, Department of Economics, Semnan University, Semnan, Iran
Abstract
Education, as one of the key indicators of human development, plays a decisive role in reducing social and economic inequalities. Unequal education exacerbates income disparities, while economic inequality restricts balanced access to education. This study examines the impact of different educational levels on income distribution inequality in Iran using Household Income and Expenditure Survey (HIES) data from 1984–2023. In this research, the Gini coefficient was calculated for each educational level. The effect of educational inequality (measured by the standard deviation of educational expenditures) on income inequality was then analyzed using the Panel ARDL econometric model, with average household expenditures and unemployment rates as control variables. The results indicated that educational inequality in Iran followed an increasing trend over time, reaching its highest level in recent years. Furthermore, the findings revealed that both educational inequality and unemployment rates had a positive and statistically significant effect on income inequality. Additionally, the results demonstrated that average household expenditures within each educational group had a negative and significant impact on reducing income inequality. Finally, based on the study’s findings, it is recommended that the government implement appropriate policies to reduce educational inequality and enhance access to higher education for all members of society, particularly low-income groups.
Introduction
Income inequality, as a fundamental challenge for developing economies, has consistently garnered the attention of policymakers and researchers. Among the contributing factors, the role of human capital, and specifically the level of education, stands out as a crucial determinant of income distribution (Schultz, 1961; Becker, 1964). Human capital theories posit that increased educational attainment leads to the enhancement of individuals' skills and productivity, consequently providing access to higher-paying job opportunities (Mincer, 1974). Conversely, unequal access to educational opportunities at various levels can exacerbate income inequality within society (Bourdieu, 1986).
In the Iranian economy, despite efforts to expand education, significant disparities in income distribution persist. Examining the relationship between educational attainment and income distribution in this country, considering its unique economic and institutional structure, is of paramount importance. This study focuses on different educational levels to investigate the factors influencing educational inequality in Iran during the years 1984–2023. It seeks to answer the fundamental question of whether and how different levels of education impact income distribution in the country. Analyzing this relationship can lead to a deeper understanding of the factors driving income inequality and provide a basis for designing more effective educational and economic policies aimed at reducing this disparity.
Methods and Materials
To examine the impact of education on income inequality in Iran during the period 1984–2023, this research utilizes data from the Household Income and Expenditure Survey conducted by the Statistical Center of Iran. The methodology comprises two main parts: First, the calculation of the Gini coefficient for each educational level (elementary, middle school, high school, associate's degree, bachelor's degree, master's degree, and doctorate). This was achieved by extracting household expenditure information from the questionnaires and calculating the cumulative relative frequency of households and their expenditures at each educational level.
Second, the investigation of the relationship between education and income distribution within the framework of income functions based on human capital theory. This theory posits that investment in education leads to an increase in individuals' income and affects the income distribution of society. The research employed a simple income function and its generalization for N years of schooling to examine how the distribution of the rate of return on educational investment, the intensity of investment, and years of schooling impact relative income distribution. Finally, a model for analyzing income distribution at different educational levels in Iran was estimated, where the Gini coefficient of each educational group was considered a function of the dispersion of educational expenditures, the average household expenditure, and the unemployment rate at the same educational level.
Results and Discussion
The results of the panel ARDL (Autoregressive Distributed Lag) econometric model indicate that an increase in the average household expenditure leads to a reduction in income inequality (Gini coefficient) in the studied educational levels in both the short and long run, with the long-term effect being stronger. This finding contradicts the Kuznets curve hypothesis, suggesting that in this dataset, increased expenditures directly improve income distribution. In contrast, the dispersion of educational expenditures has a positive and significant impact on the Gini coefficient, implying that greater inequality in educational expenditures exacerbates income inequality. The unemployment rate also has a positive (although statistically insignificant at the 5% level) effect on the Gini coefficient in both the short and long run, such that an increase in unemployment leads to higher income inequality, with a larger long-term effect. The error correction coefficient indicates that approximately 44% of the short-run disequilibrium in the Gini coefficient is adjusted within approximately two periods, suggesting a moderate speed of adjustment towards the long-run equilibrium.
Conclusion
This research, by examining the impact of different educational levels on income inequality in Iran during the years 1984–2023, revealed that income inequality among graduates of higher education levels is significantly greater, which contradicts the expectation of decreasing inequality with increased education. An increase in the average household expenditure was associated with a decrease in inequality, while the dispersion of educational expenditures and the unemployment rate were linked to an increase in inequality. The results of the ARDL model suggest that the impact of independent variables on income inequality occurs with a time lag. It is recommended that to reduce inequality, educational infrastructure in deprived areas should be developed, financial aid should be provided to low-income students, educational programs should be aligned with labor market needs, and job opportunities should be created for graduates. Attention to multidimensional inequality indicators is also necessary for a more accurate understanding of the situation.
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