Analyzing the Effect of Economic Complexity on Income Inequality in Iran

Objective: In recent decades, rapid economic growth and increasing inequality have become two of the most pioneer phenomena in the world. Although better economic conditions lead to a significant reduction in poverty and a significant increase in social welfare, increasing income disparity has been raised as a concern. The evidences suggests that rising inequality can reduce investment, consumption, and growth by fueling economic, financial, and political instability. One of the concepts that has received much attention in recent years and justifies the difference between rich and poor countries is the issue of economic complexity. Economic complexity reflects the knowledge and skills of a country's manpower in the production process, in order to produce more advanced and complex products in the international competition, the need to achieve higher economic growth and consequently to be on the path of progress and development; Economic growth that, by employing skilled and knowledgeable people, can increase their level of well-being and reduce income inequality.Method: the present study investigates the effect of economic complexity on income inequality in Iran during 1995- 2020 period by using ARDL model. So dependent variable is income inequality and we use gini coefficient for it and independent variables are economic complexity, government expenditure growth, real income per capita growth, inflation and poverty rate. Therefore, the main hypothesis of this study is that: economic complexity has a positive effect on income inequality. Government expenditure, per capita income, inflation and poverty are other variables used in this research. According to the dependent variable, the Gini coefficient data from Central Bank of Iran website has been used to measure income inequality. Economic complexity data are collected from the MIT Media Lab's Observatory of Economic Complexity and are based on international trade data linking countries to exported products. The variable data of government expenditures, including the aggregation of construction and current government expenditures, were collected from the website of the Central Bank of Iran. The variable data of per capita income was also extracted from the World Bank, in order not to have problems with the variable of inflation, these data were collected in real terms. Inflation variable data, including Iran's inflation rate, was collected from Staticta website. The variable poverty data also includes the