Does Population Aging Affect Income Inequality in Iran?

Abstract

Objectives: The aging of the population in recent years in Iran has raised concerns among policymakers in various fields. Some economic theories consider the changes in the age structure and population aging as one of the important issues affecting the income inequality of societies. This study aims to assess the effect of population aging on the income inequality in Iran. Methods & Materials: This study was conducted in 2020 using economic data from 1970 to 2018 extracted from the websites of the Statistical Center of Iran and the World Development Indicators. First, a model for income inequality was presented and demographic variables were considered in the model. Then, its coefficients were estimated using the AutoRegressive Distributed Lag method in Eviews 10 software. To evaluate the speed of adjustment from the short-run to the long-run equilibrium, the Error Correction Model (ECM) was estimated. Results: The increase in aging population led to increased income inequality in the long run such that 1% increase in aging index caused a 0.14% increase in Gini index (P<0.05). The literacy rate, trade openness, and the square of Gross Domestic Product (GDP) per capita had a negative significant effect, and GDP per capita and the Consumer Price Index had a positive significant effect on income inequality, both in the short and long term. The ECM value was reported 44.8%. Conclusion: The aging of the population increases income inequality in Iran. Policymakers should reduce income inequality by investing in education and expansion of trading with other countries as well as stabilizing economic conditions, controlling inflation, and planning to reduce the effects of aging.