Economic Growth and Income Inequality: The Role of Fiscal Policy, Iraq as An example for the Period of 2004-2019.

Abstract

Generally economic growth tends to lower inequality in the economy. The objective of this article is to determine the role of fiscal policy on inequality throughout economic growth. Iraq for the period of (2004-2019) has been chosen. Gross domestic production (GDP), Government expenditure (G.EXP), Poverty, and ISIS variables have been considered to model this article. Two models have been applied. The first one; is the model of the effect of G.EXP and ISIS on GDP by using the ARCH model. The result shows that G.EXP has a positive impact on economic growth. The second model is to examine the effect of GDP on Poverty by using the ARDL model. The result shows that GDP has a negative relationship with poverty as GDP increase poverty tends to decrease. The impacts of previous economic growth have more effect on poverty. It is anticipated that G.EXP decrease and GDP increases for the period of 2020 to 2025. It is recommended that government has to take immediate action to lower the rate of poverty and lessen the income distribution inequality in economy and reconstruct the harmed area by war to return migrated people to their original place. Increase the investment expenditure. Further study is needed with different and longer time interval and other relative variables related to this topic and using different methods for econometric models.