The Role of Market Income, Taxes and Subsidies in Income Inequality in the Iranian Economy: Microdata Analysis (2011-2023)

Articles in Press

Authors

1 PhD Student, Faculty of Economics, Imam Sadiq University

2 Associate Professor of Political Economy Department. Faculty of Islamic Studies and Economics, Imam Sadiq University.

10.30471/iee.2025.10953.2512

Abstract

Understanding the role of different income sources in analyzing income inequality and the redistributive effects of taxes and subsidies is crucial for policymakers. In this article, using microdata from the Household Income and Expenditure Survey (2011–2023), first, household per capita income is categorized into three components: taxes (as a component reducing household income), subsidies, and market income. The contribution of each source to the Gini coefficient of per capita income was determined using the Lerman and Yitzhaki(1985) method. Next, market income was disaggregated into the following groups: non-labor income, wage and salary income from the public, private, and cooperative sectors, and self-employment income in agricultural and non-agricultural sectors. Results on the role and impact of each group are presented. The findings revealed that both taxes and subsidies have limited redistributive effects, while market income contributes most significantly to per capita income inequality. Furthermore, the largest share of market income inequality stems from non-labor income disparities, followed by wage inequalities in the private and public sectors, which account for the next-largest share.

Keywords

Journal of Economic Essays: an Islamic Approach

Articles in Press, Accepted Manuscript
Available Online from 15 September 2025

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