The Impact of Value of stock market on Poverty and Inequality: A Case Study of Iran’s Provinces

Document Type : RESEARCH PAPER

Authors

1 Associate Professor, Department of Economics, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran.

2 Master's graduate, Department of Economics, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran.

Abstract

Equity market liquidity can prevent the outflow of large capital and enhance economic growth by transforming it into investment in productive projects, resulting in increased production, employment, and wage growth, ultimately reducing income inequality in developing countries, such as Iran. Lack of sufficient capital is considered one of the effective factors contributing to low economic growth and, consequently, poverty and income inequality. In a world where some people live in poverty and income disparity is evident, investigating poverty and human welfare in the context of global development holds a crucial position. Alongside the significance of the stock market as part of the capital market and its potential impact on these issues, especially in less developed countries like Iran, this study investigates the effect of value of transactions on poverty and income inequality in Iranian provinces from 2011 to 2022 using panel data and Generalized Least Square (GLS) estimator. The validity and sensitivity of the results are also examined using Panel System Generalized Method of Moment (GMM) estimator. The results of the poverty model show a significant inverse relationship between equity market liquidity and the poverty index in all provinces, including both developed and less developed provinces. In other words, an increase in equity market liquidity has led to a decrease in the poverty rate. However, in developed provinces, the liquidity of the equity market has contributed to an increase in poverty. On the other hand, equity market liquidity has not shown any significant impact on income inequality in the three groups of total provinces, developed provinces, and less developed provinces. it is suggested that measures such as market transparency, increased market access, reduced transaction costs, improved market infrastructure, financial support for firms from the capital market, and increased involvement of low-income individuals and the poor in the stock market should be taken to enhance the role of equity market liquidity in reducing poverty and promoting more equitable income distribution.

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Main Subjects

References

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Stable Economy Journal
Volume 5, Issue 4 - Serial Number 16
December 2024
Pages 133-163

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