Survey of the Interaction Relationship Between Rural Income Inequality and Agricultural Sector Growth in Iran: Using Panel-VAR

Introduction Sustainable economic growth accompanies a reduction in poverty. One of the critical aspects of economic growth is the income distribution issue. The Gini coefficient is one of the indicators of the equal income distribution. The income distribution and economic growth are two critical indicators in the study of economic performance, so they are crucial for policymakers. The agricultural sector growth is essential to achieve economic development, and it can accelerate economic growth. Villages play an essential role in ensuring food security, whereas rural households earn the majority of their income through agricultural activities; so it is necessary to study the relationship between income distribution and the growth of the agricultural sector. The purpose of this study is to investigate the relationship between rural income distribution and economic growth of the agricultural sector. Materials and method According to the study purpose, We collected the data of "GDP per capita" and "per capita value added of the agricultural sector at constant prices" annually from 2001 to 2016 from "the Statistics Center of Iran". "The rural Gini coefficient", for the period 2001-2016, have also been collected from the Statistics Center of Iran. The inflation rate data for the period 1380-1395 is gathered from the Central Bank. Data on higher education and the number of agricultural students have been collected from the yearbook of the Statistics Center of Iran for the period 2001-2016. All data except the inflation rate are provincial form, and they are related to all 30 provinces of Iran.Since this research has two parts, the form of its experimental model will also include two experimental models.Results and discussion Firstly, the stationarity of the variables was investigated, and the results of the unit-root test shown that all variables are Stationary. As can be seen from the estimates obtained in the macroeconomic section of the panel approach, with increasing GDP per capita (economic growth), the Gini coefficient (income inequality distribution) also increases. There is also a significant relationship between the Gini coefficient and higher education, which suggests that the higher the education level, the greater the income share, that it leads to income inequality. This result is consistent with the theory and previous studies conducted. In the PVAR approach, there is a one-way causal relationship of per capita GDP to the Gini coefficient. In other words, a change in income inequality is the cause of changes in economic growth. In the agricultural sector, in the panel approach, there is a positive relationship between the Gini coefficient and the per capita value added of the agricultural sector. As the per capita value added of the agricultural sector increases, so does the Gini coefficient. The PVAR approach also establishes a one-way causal relationship between the per capita value added of the agricultural sector and the Gini coefficient. Suggestion Based on the results, policymakers need to put appropriate policies on the agenda to reduce income inequality. In this regard, the best policy is to redistribute income. Wealth should be taken from wealthy people in the form of mechanisms such as tax collection and redistribution among the poor in the form of subsidies or the provision of public goods. Given the positive relationship between education and economic growth, it is suggested that the government invest in education and improve educational facilities. Inflation is one of the phenomena that can have positive and negative effects, and one of its most important effects is the change in income distribution so that it is in favour of high-income deciles and to the detriment of low-income groups and decimators.JEL Classification: D33،E01, E24