The Relationship between Industrial Agglomeration, Economic Growth, and Income Inequality in Iran’s Provinces

Document Type : applicative

Authors

1 Master's student in Economic Sciences, Theoretical Economics, Shahid Bahonar University of Kerman

2 Economics - Faculty of Economics - Shahid Bahonar University of Kerman - Kerman - Iran

10.30473/jier.2025.75094.1499

Abstract

This study aims to investigate the interrelationships between industrial agglomeration, economic growth, and interregional income inequality across Iran's provinces during the period (2011-2021). To achieve this goal, a three-equation simultaneous equations model was developed and estimated using Two-Stage Least Squares (2SLS) and provincial panel data. The results reveal a significant bidirectional relationship between industrial agglomeration and economic growth. Industrial agglomeration is positively influenced by economic growth, capital accumulation, market size, and population. In turn, income inequality has a significant negative impact on economic growth, although its effect on agglomeration is statistically insignificant. Moreover, industrial agglomeration contributes to reducing regional income disparities. Inflation emerges as the most influential factor in increasing inequality, while urbanization and economic growth play key roles in its reduction. These findings suggest that regional industrial development can simultaneously promote both economic growth and equity. Accordingly, it is recommended that policymakers strengthen regionally-targeted industrial policies, control inflation, and ensure a more balanced distribution of financial resources to support inclusive and equitable development across provinces.

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Main Subjects

Journal of Industrial Economics researches
Volume 9, Issue 31
September 2025

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History

  • Receive Date: 07 July 2025
  • Revise Date: 11 August 2025
  • Accept Date: 01 September 2025

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