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The main purpose of this paper is to estimate a model of factors affecting income (expenditure) distribution in Iran. Doing so, first Gini coefficients and shares of different 20 th income catagories have been estimated for different Iranian Provinces. Then, using the most recent cross-province data by applying a multivariate regression model. the effects of the GRP, Inflation, tax and Government expenditure on the economic inequality have been estimated. According to the results, the Kuznets hypothesis can not be accepted. Ratio of income tax to GRP, Inflation and government expenditure have inequality effects. In order to analyse the effects on different twenties, the SUER model is estimated. The results indicate that increase in per capita income has reduced inequality via decrease in 5th twenties in favour of the other 20 th, especially the 1st twenties. On the other hand, increase in tax, Inflation and government expenditures have increased inequality through the reduction in share of the first four twenties (%80) of population in favour of the top twenty percent.
JEL Classification: D31, C16, C23, C33