Djavad Salehi-Isfahani (Source:
The Middle East Institute)
Djavad Salehi-Isfahani is Professor of
Economics, Virginia Tech University, and Guest Scholar, Wolfensohn Center for
Development, Brookings Institution
Thirty years ago, Ayatollah Khomeini proclaimed equity and social justice as the
Revolution's main objective. His successor, Ayatollah Khamene'i, continues to
refer to social justice as the revolution's defining theme. Similarly,
Presidents Khatami and Ahmadinejad, though they are from very different
political persuasions, placed heavy emphasis on social justice in their
political rhetoric. Yet the very fact that 30 years after the revolution social
justice continues to occupy the highest place in Iran's political discourse
implies that this goal of the revolution remains as elusive as ever.
Inside Iran the facts regarding
the evolution of equality are hotly debated. However, data from the Statistical
Center of Iran offer evidence of how inequality has changed in terms of
household expenditures, education attainment, and access to health and basic
services. The picture that emerges is a mixed one: success in improving the
standard of living and the quality of life for the poor, and failure in
improving the overall distribution of income.
The most obvious, if not
quantitatively most important, source of inequality in Iran is the ruralurban
differential. Figure 1 shows that during the great economic downturn of 1984-88,
average expenditures in rural and urban areas fell by 20% and 33%, respectively,
narrowing the rural-urban gap in expenditures. Rural incomes continued to grow
faster than urban, raising the rural-urban ratio to a historic high of 69% in
1990, before falling back to 53% in 2006. The widening rural urban gap in the
last 15 years has contributed significantly to the resilience of measured inequality in the country as a
Immediately following the
revolution, overall inequality fell substantially, by about ten Gini points,
from 0.56 to 0.46,1 but has
since remained fairly stable at levels well above those observed in countries
such as Egypt. It is nonetheless much lower than in Latin America (see Figure
2). Rural inequality, which was much lower than urban inequality during the war
years (1980-88), increased sharply after the war, reaching the urban level, most
likely because of government policies such as ending the rationing (that had
protected the poor from inflation during the war) and permitting a greater role
for markets in setting prices.
Significantly, during the first
two years of the Ahmadinejad Administration (2005-06) inequality worsened in
both rural and urban areas, possibly because higher inflation hurt those below
the median income level more than those above it. This is not so much an
indication that Ahmadinejad was insincere in promising redistribution but how
difficult it is to redistribute income without fundamental changes in the
country's distribution of earning power (wealth and human capital) and political
power, which determines access to government transfers from oil rent.
Despite a lack of improvement in
inequality, poverty has declined steadily in the last ten years. Figure 3 shows
the proportion of individuals who were poor (the Headcount ratio) during
1984-2006 using separate rural and urban poverty lines.2 Poverty rates increased
sharply during 1984-88 but, contrary to popular belief, fell during the economic
reconstruction and market reforms. Poverty rose again briefly when the economy
had to adjust to the balance of payments crisis of 1994-95. Since then, poverty
has declined steadily to an enviable level for middleincome developing
countries.3 Despite claims to the contrary, during the eight years of the
Khatami Administration, poverty fell by more than 2 percentage points each year.
Significantly, in the first two years of the Ahmadinejad government, urban
poverty appears to have increased by 1.5 percentage points, or about 680,000
individuals (rural poverty remained unchanged). Given the huge inflow of
resources into the economy in 2006 and the Ahmadinejad government's active
redistributive efforts, the increase in urban poverty is quite striking. The
data for 2007 and 2008 are not available to reach a definitive conclusion on the
current administration's efforts at redistribution and poverty reduction, but
the available evidence on inequality and urban poverty does not bode well for
Perhaps the greatest achievement
of the revolution during its 30-year history is the expansion of educational
opportunities, especially for women and rural families. Figure 4 shows the
impressive gain in education by the least educated group - rural women. Their
average years of schooling increased from about 40% of their male counterparts
for women born in the 1960s (who started school during the Shah's White
Revolution) to about 90% for those born in the late 1980s (who started school
after the war with Iraq). Urban women have now surpassed urban men in average
years of schooling, a phenomenon that led Iran's Parliament to seriously
consider and partially implement affirmative action for men in entering
Increased access to free
education from primary to university has equalized educational attainment
between individuals. The Gini index of inequality of years of schooling for
adults born in the 1950s was in excess of 0.60, compared to 0.35 for cohorts
born 20 years later, which is a substantial decrease in education inequality in
just one generation. However, there is evidence that educational attainment
still depends greatly on family resources.5
Education inequality is likely to worsen as private education, both at the
university and high school levels, continues to expand.
Health and basic services
Another major equalizing
achievement of the country in the last 30 years is reduced fertility, especially
in rural areas, thanks mainly to increased education and improved access to
health and other basic services (electricity and piped water). Together with
women's gains in education, family planning has substantially advanced gender
equality in Iran, bringing social pressure to improve women's status in law. In
rural areas the average number of births per woman fell from about eight in the
mid-1980s to about two in 2006. The poor's access to basic services has
substantially increased: during 1984-2004 access to electricity by the poorest
quintile (bottom 25%) in rural areas increased from 37% to 94% and to piped
water from 31% to 79%.6
Remarkably, as a result of the extension of these services, by 2004, 80% of
these households owned a refrigerator, 77% a television, and 76% a gas stove.
There are very few countries
(e.g., South Korea) that have combined economic growth with increased equity.
Iran is not one of them. Nevertheless, much has been achieved in terms of
improving the lot of the poorest section of the population. Even so, many
Iranians seem disappointed with the material improvements of the last 30 years.
There are good reasons why. In the last ten years, a huge inflow of oil revenues
has taken place without any improvement in income inequality. Added to this is a
lack of government transparency, which has fueled suspicion about how the oil
riches are being spent. Ahmadinejad's populist rhetoric has intensified fears of
corruption and distrust of the rich in a country where wealth accumulation is
held in low esteem, no matter its sources. Indeed, the proper purpose of
politics and governance in Iran is considered to be redistribution much more so
than promoting economic growth. As the revolution enters its fourth decade, with
oil prices down for the foreseeable future and the disappointing results of the
latest experience with populist politics already evident, it would be
interesting to speculate if this narrow view of politics is likely to change. The June 2009 presidential
election is a good time to find out.
1. Djavad Salehi-Isfahani, "Poverty,
Inequality, and Populist Politics in Iran," Journal of Economic Inequality,
published online February 21, 2008.
2. In 2005 Purchasing Power
Parity dollars these lines were $2.7 per person per day for rural and $3.8 for
urban individuals. See Djavad Salehi-Isfahani, "Poverty, Inequality, and
Populist Politics in Iran."
3. Based on the international
two-dollars-per-day poverty line ($3 in 2006), Iran's poverty rate in 2006 was
only 6%, which is very low by the standards of developing regions. See Shaohua
Chen and Martin Ravallion, "The
Developing World is Poorer Than We Thought, But No Less Successful in the Fight
Against Poverty," The World Bank Development Research Group, Policy Research
Working Paper 4703 (2008).
4. See Djavad Saleh-Isfhani, "Are
Iranian Women Overeducated?" The Brookings Institution (2008).
5. Djavad Salehi-Isfahani and
Daniel Egel, "Youth
Exclusion in Iran: The State of Education, Employment and Family Formation,"
Working Paper, The Brookings Institution (2007).
6. Djavad Salehi-Isfahani, "Revolution
and redistribution in Iran: poverty and inequality 25 years later,"
Economics Working Paper, Virginia
Tech University (2006).
The Iranian Revolution at 30
Source: The Middle East Institute
This wide-ranging mega-collection of more than 50 original
essays is the first of a series of six similar publications
commemorating the events of 1979.
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