Is income inequality reflected in consumption inequality in Iran?

Abstract

This paper presents a descriptive analysis of the evolution of labor supply, income, and consumption inequality in Iran using the 2005–2015 waves of the survey of Household Expenditure and Income (HIES). We document that the sharp decline in income and consumption inequality after the Subsidy Reform in 2010 was accompanied by a slight but persistent rise in respective inequality measures. We find that not only the level of income inequality is higher than consumption inequality but also that the fluctuations in income inequality are larger than those of consumption inequality. Moreover, income and consumption inequalities among rural households are higher compared to urban families. Finally, we show that within-group inequality, the inequality due to circumstances, can explain a considerable portion of the divergence observed between income and consumption inequalities.