Estimation of Confidence Intervals for the Threshold Level of Income Inequality in Iran

Piraee, Khosrow; Alizadeh, Mohammad; Rezaei, Hadi; Barzegar Marvasti, Maryam

doi:10.22075/jem.2017.1503

Estimation of Confidence Intervals for the Threshold Level of Income Inequality in Iran

Authors

¹ Associated Professor of Economics, Shiraz Islamic Azad University, Tehran-Iran

² Assistant Professor, Department of economics, Lorestan University, Tehran-Iran

³ Ph.D Student in economics, Lorestan University

⁴ Ph.D Student in economics, the University of Tabriz

10.22075/jem.2017.1503

Abstract

Â The overall aim of this study is to construct confidence interval for the optimal size of income inequality, i.e., that size of income inequality which is embodying optimal economic growth in Iran concerning 1353-1391. This size is called to the threshold limit. i.e., the size of income inequality more this limit, has a negative effect on economic growth. Using Hansen two - regime threshold regression model, a relationship was obtained between the effects of income inequality threshold level and economic growth. Then, bootstrap test was done to test linear hypothesis at problems of existence of threshold method. Finally, likelihood ratio was used to obtain the confidence interval for threshold. The results show that income inequality in Iran follow up threshold two regime methods that was 0.417. Also, likelihood ratio test result indicates that the threshold level of income inequality is within the confidence interval .

Keywords