The Effects of Governmentʹʹs Financial Polices on Economic Growth and Income Distribution (Case Study: Iran)

Due to importance of the effect of government policies in economic, influencing welfare of people of society, herein this paper, we are to study the effect of financial policies of government on economic growth and income distribution in Iran. For this purpose, we use Vector Auto-regression Equations systems (VAR) in such a way as in this system of equations; the variables of economic growth rate and inequity index (GINI’s Coefficient) are inserted into the model as endogenous variables. Financial means of government (cost credits, capital assets proprietorship credits, social expenses and tax incomes of government) are inserted into the model as exogenous variables. The results of this study reveal that tax incomes have meaningful inverted effects on economic growth and eventually, they have caused raise of inequity in society. Government expenditures have meaningfully caused decrease of economic growth. However, they have had no meaningful effects on income distribution. Moreover, civil expenditures of government have meaningful effect (at the level of 10%) on increase of economic growth. But, they have had no meaningful effects on distribution of income and social expenditures of government have had no meaningful effects on economic growth and income distribution.