The Effect of Urbanization on Income Inequality in Iran

Abstract. The dramatic growth of urbanization with the expansion of cities in terms of size and population has led to the creation of a variety of administrative structures to provide different types of administrative services and combinations. And bureaucratic and social mismatches cause corruption and unequal distribution of income and class fault. The main purpose of this study is to investigate the impact of urbanization on income inequality in Iran during the period 1365-95. Self-explanatory model, Johansson-Joselius method and error correction method were used to analyze the subject. The results indicate that in the long run, there is a positive and significant relationship between urbanization and income inequality in Iran and a one percent increase in variables, GDP, employment, foreign direct investment, business returns, corruption, inflation and production share in production. Gross domestic product increases income inequality by 0.27, 2.39, 6.34, 5.5, 8.49, 5.28, and 1.05%, respectively, and the effect of corruption on the mentioned variables Income inequality is greater than other variables, and ways to combat corruption should be prioritized. Also, the results based on the error correction coefficient indicate that in each period, about 0.83 of the short-run imbalance is adjusted to achieve long-run equilibrium.