Evaluating mutual impacts of Agricultural Growth and Inequality in Iran's Rural area divided to Provinces with Amenity and Deprived: Simultaneous Equations of Panel Data Approach

Purpose- Income distribution inequity in low income societies spreads poverty faster therefore it is essential to indicate the relation between economic growth and income distribution in low income societies like rural societies which gain income through agricultural activities. On the other hand, recent studies show that societies amenity or deprivation is effective on the relation between growth and income distribution. So the aim of this study is to indicate the relation between rural income distribution and Iran agricultural sector growth dividing to regions with amenity or deprived.Design/methodology/approach - Due to economic literature income distribution and economic growth has interactional effect on each other and the relation between them is different in regions with amenity and deprived. To explain the relation between rural income distribution and agricultural sector growth in this study two equations are introduced, the first equation analyzes the effective factors on agricultural sector growth and the second equation examine the factors determining rural income inequality. These equations are estimated by provincial data divided to regions with amenity and deprived during 2008-2016 and simultaneous equations approach of panel data is used.Finding-The results show that, in low amenity and deprived provinces agricultural sector growth reduces the inequality while agricultural sector growth has no significant effect on inequality in provinces with amenity. Also inequality increase lead to economic growth in deprived regions, but in regions with amenity the effect of inequality on growth is not significant. Besides, the results of estimation imply that government's expenditure in provinces increase rural income inequality and development expenditure only in deprived and low amenity provinces cause rural income inequality decrease and in other rural is not significant on inequality index.Practical implications- Based on the results of this study and in order to reduce rural income inequality and the growth of agricultural sector, it is necessary to consider the distribution of public facilities and infrastructure in order to enjoy deprived and low amenity rural regions.