Tax Inflation and Welfare in Iran over Five Decades

Document Type : Research Paper

Authors

1 Department of Theoretical Economics, University of Mazandaran, Babolsar, Iran.

2 Department of Energy Economics, University of Mazandaran, Babolsar, Iran.

Abstract

The purpose of the current research is to explain the effect of inflation tax on economic welfare in symmetrical and asymmetrical approach. In this way, firstly, economic welfare was calculated using the composite index of welfare based on four dimensions of average flow of consumption, wealth or accumulation of production reserves, income inequality and economic security over five decades. The results of the data description show that after the war and in the 1990s with the adoption of policies for the development of the country, the economic prosperity has increased, and this trend has continued in the 2000s due to the single rate of the exchange rate and creation of currency reserve account. In the 2010s, economic prosperity has decreased due to the intensification of economic sanctions and the increase of inflation and recession. In the next part of the research, the symmetric and asymmetric estimation of the model based on the Linear and Non-Linear Autoregressive Distributed Lag model was carried out in the period of 1971-2021. The long-term results of estimating the model in a linear (symmetric) approach indicate that the inflation tax has a negative effect on economic welfare. In the non-linear (asymmetric) approach, this reverse effect was also confirmed, in such a way that increases in the inflationary tax affect economic well-being more than decreases in it. As expected, inflation has a negative and asymmetric effect on economic welfare, so that the inverse effect of increases in inflation on well-being is far more than decreases in it. Another finding is that unemployment has a negative effect and per capita income has a positive effect on economic welfare.

Keywords

Main Subjects

References

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Journal of Economic Research (Tahghighat- E- Eghtesadi)
Volume 59, Issue 2
November 2024
Pages 179-203

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History

  • Receive Date: 02 December 2023
  • Revise Date: 28 September 2024
  • Accept Date: 12 November 2024

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