ENERGY, ECONOMIC GROWTH, INEQUALITY, AND POVERTY IN IRAN

Abstract

This paper examines the relationships among energy consumption, economic growth, inequality, and poverty in Iran. We estimate these relationships at both the aggregate and sectoral level using instrumental variables to address endogeneity and simultaneous equation models to enhance efficiency. Results show that decreasing inequality will be beneficial for economic growth, poverty alleviation and energy access. Inequality can negatively affect GDP directly, as well as indirectly through its negative effect on energy consumption. Similarly, inequality can increase poverty both directly as well as indirectly through its negative effect on energy consumption. We also find that increasing energy consumption has multiple benefits: it increases GDP, tends to decrease inequality and decreases poverty. Energy consumption decreases poverty both directly as well as indirectly via its effect on decreasing inequality. Our results therefore suggest that policies to improve energy access are important, and will have the benefits of increasing GDP, decreasing inequality and decreasing poverty.