Volume 26, Issue 1 (4-2026)
Social Welfare Quarterly 2026, 26(1): 283-310 |
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Hashemi S A, Hafezi B, Sharifi Renani H. (2026). The Role of Income Inequality in the Effect of Good Governance on Women Economic Inclusion in Iran. Social Welfare Quarterly. 26(1), 283-310. doi:10.32598/refahj.26.100.4
URL: http://refahj.uswr.ac.ir/article-1-4491-en.html
URL: http://refahj.uswr.ac.ir/article-1-4491-en.html
Keywords: Good Governance, Income Inequality, Smooth transition Regression method, Women Economic Inclusion.
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Extended Abstract
Introduction
Women’s economic inclusion—defined as women’s participation in the formal sector of the economy—is an important driver of socioeconomic progress, particularly through poverty reduction, structural transformation in the labor market, and enhancement of women’s welfare. Accordingly, efforts to promote women’s economic inclusion remain a priority in academic and policy discourse (Asongu, 2020).
Income inequality affects a country’s development process. Part of this inequality stems from differences in human capital among individuals, whereby those with superior human capital enjoy higher income levels (Munir & Kanwal, 2020). The negative impact of income inequality on gender equality and participation is a critical concern, partly because it restricts women’s access to education. Rising income inequality reduces educational opportunities for women and girls, which in turn diminishes their economic participation—that is, their economic inclusion (Asongu & Odhiambo, 2021). Furthermore, women’s acceptance of low-paying jobs discourages employers from hiring them for senior positions requiring extensive on-the-job training.
Governments bear responsibility for providing public services that uphold human rights, including education and healthcare, ensuring accountability through transparency and free information flow, guaranteeing security, facilitating social participation of disadvantaged groups, and raising awareness about human rights. Improving governance is essential to fulfilling these responsibilities. Governments must recognize the diverse needs of their citizens—both women and men—and enable women to exercise their right to participate in decisions affecting their lives. To achieve this, appropriate policies to enhance women’s economic inclusion are necessary.
Some studies, such as Asongu & Odhiambo (2021), have identified a nonlinear effect of income inequality on women’s economic inclusion and determined a specific threshold at which income inequality alters the effect of good governance. When income inequality is low, good governance can promote women’s economic inclusion by improving social and economic structures. However, once inequality surpasses a certain threshold, the positive effect of good governance weakens and may even turn negative. Therefore, this study investigates the threshold effects of income inequality and good governance on women’s economic inclusion in Iran.
Method
The model employed to analyze the effect of income inequality and good governance on women’s economic inclusion in Iran over the period 2005–2023 is the Smooth Transition Regression (STR) model, presented as Equation (1):
GIt=[α0+α1 GINIt+α2 GOGt+α3 ITt+α4 GDPt]+[β0+β1 GINIt+β2 GOGt+β3 ITt+β4 GDPt].Q(γ,C,St )+ϵt (1)
GI is the percentage of women employed in formal jobs compared to the total population as inclusion index of women. GINI is the income inequality index. GOG is the good governance index, which is obtained by averaging 6 good governance indicators which are introduced by the World Bank. IT is the information and communication technology index. GDP is an indicator of economic growth.
Findings
The optimal lag for GI and GOG is 2, for the Gini coefficient and IT variables is 3, for GDP is 4. The test for selecting the transition variable showed that (GINIt-2) is the transition variable and) the appropriate proposed model is LST1. The estimation results of model 1 indicate that the threshold of the transition variable is 0.71 percent (equivalent to a Gini coefficient rank of 0.512). The slope parameter also shows that the GI function has been transferred from the first regime to the second at a speed of 13.45.
Discussion
GINI had a negative impact on GI in both regimes, but this effect has been exacerbated in the second regime. The negative impact of GINI on GI has led to women’s lack of access to suitable jobs and a decrease in women’s labor force participation in the economy, due to reasons such as their deprivation of educational and training opportunities.
GOG had a positive effect on GI in the first regime and a negative effect in the second regime, which confirms the existence of an inverted U-shaped relationship. Based on this finding, the role of GINI, or in other words, the difference in socio-economic class of individuals, in changing the way GOG affects GI is confirmed. GDP had a positive effect on GI in the first regime and a negative effect in the second regime, which confirms the existence of an inverted U-shaped relationship. IT had a positive effect on GI in both regimes, but this effect is weakened in the second regime.
Income inequality negatively affects women’s economic inclusion, and this effect becomes stronger in the second regime. It also changes the impact of good governance and economic growth on women’s inclusion from positive to negative, while weakening the positive role of information and communication technology. These findings highlight the need to reduce income inequality. Possible policy responses include progressive taxes on income and wealth, wider access to quality education for low-income groups, greater investment in public health, especially for disadvantaged women and female-headed households, and targeted transfer payments to support low-income women and girls. In addition, since good governance has a positive effect in the first regime, improving governance institutions is essential for promoting more inclusive and equitable development.
Ethical Consideration
Compliance With Ethical Guidelines
This research was conducted in accordance with ethical principles for human studies
Authors’ contributions
All authors have made substantial contributions to this study.
Funding
This study was not funded.
Conflicts of interest
The authors declared no conflict of interest.
Acknowledgments
In the present study, all ethical considerations, including the conditions of trustworthiness, honesty, and non-plagiarism, were observed, also we would like to thank all those who contributed to this study.
Asongu, S., & Odhiambo, N. (2021). Thresholds of income inequality that mitigate the role of gender inclusive education in promoting gender economic inclusion in sub-Saharan Africa. Social Responsibility Journal, 17(1), 106-126. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3496346
Asongu, S. A., & Odhiambo, N. M. (2020). Inequality thresholds, governance and gender economic inclusion in sub-Saharan Africa. International Review of Applied Economics, 34(1), 94-114. https://ideas.repec.org/a/taf/irapec/v34y2020i1p94-114.html
Munir, K., & Kanwal, A. (2020). Impact of educational and gender inequality on income and income inequality in South Asian countries. International journal of social economics, 47(8), 1043-1062. https://ideas.repec.org/a/eme/ijsepp/ijse-04-2020-0226.html
Introduction
Women’s economic inclusion—defined as women’s participation in the formal sector of the economy—is an important driver of socioeconomic progress, particularly through poverty reduction, structural transformation in the labor market, and enhancement of women’s welfare. Accordingly, efforts to promote women’s economic inclusion remain a priority in academic and policy discourse (Asongu, 2020).
Income inequality affects a country’s development process. Part of this inequality stems from differences in human capital among individuals, whereby those with superior human capital enjoy higher income levels (Munir & Kanwal, 2020). The negative impact of income inequality on gender equality and participation is a critical concern, partly because it restricts women’s access to education. Rising income inequality reduces educational opportunities for women and girls, which in turn diminishes their economic participation—that is, their economic inclusion (Asongu & Odhiambo, 2021). Furthermore, women’s acceptance of low-paying jobs discourages employers from hiring them for senior positions requiring extensive on-the-job training.
Governments bear responsibility for providing public services that uphold human rights, including education and healthcare, ensuring accountability through transparency and free information flow, guaranteeing security, facilitating social participation of disadvantaged groups, and raising awareness about human rights. Improving governance is essential to fulfilling these responsibilities. Governments must recognize the diverse needs of their citizens—both women and men—and enable women to exercise their right to participate in decisions affecting their lives. To achieve this, appropriate policies to enhance women’s economic inclusion are necessary.
Some studies, such as Asongu & Odhiambo (2021), have identified a nonlinear effect of income inequality on women’s economic inclusion and determined a specific threshold at which income inequality alters the effect of good governance. When income inequality is low, good governance can promote women’s economic inclusion by improving social and economic structures. However, once inequality surpasses a certain threshold, the positive effect of good governance weakens and may even turn negative. Therefore, this study investigates the threshold effects of income inequality and good governance on women’s economic inclusion in Iran.
Method
The model employed to analyze the effect of income inequality and good governance on women’s economic inclusion in Iran over the period 2005–2023 is the Smooth Transition Regression (STR) model, presented as Equation (1):
GIt=[α0+α1 GINIt+α2 GOGt+α3 ITt+α4 GDPt]+[β0+β1 GINIt+β2 GOGt+β3 ITt+β4 GDPt].Q(γ,C,St )+ϵt (1)
GI is the percentage of women employed in formal jobs compared to the total population as inclusion index of women. GINI is the income inequality index. GOG is the good governance index, which is obtained by averaging 6 good governance indicators which are introduced by the World Bank. IT is the information and communication technology index. GDP is an indicator of economic growth.
Findings
The optimal lag for GI and GOG is 2, for the Gini coefficient and IT variables is 3, for GDP is 4. The test for selecting the transition variable showed that (GINIt-2) is the transition variable and) the appropriate proposed model is LST1. The estimation results of model 1 indicate that the threshold of the transition variable is 0.71 percent (equivalent to a Gini coefficient rank of 0.512). The slope parameter also shows that the GI function has been transferred from the first regime to the second at a speed of 13.45.
Discussion
GINI had a negative impact on GI in both regimes, but this effect has been exacerbated in the second regime. The negative impact of GINI on GI has led to women’s lack of access to suitable jobs and a decrease in women’s labor force participation in the economy, due to reasons such as their deprivation of educational and training opportunities.
GOG had a positive effect on GI in the first regime and a negative effect in the second regime, which confirms the existence of an inverted U-shaped relationship. Based on this finding, the role of GINI, or in other words, the difference in socio-economic class of individuals, in changing the way GOG affects GI is confirmed. GDP had a positive effect on GI in the first regime and a negative effect in the second regime, which confirms the existence of an inverted U-shaped relationship. IT had a positive effect on GI in both regimes, but this effect is weakened in the second regime.
Income inequality negatively affects women’s economic inclusion, and this effect becomes stronger in the second regime. It also changes the impact of good governance and economic growth on women’s inclusion from positive to negative, while weakening the positive role of information and communication technology. These findings highlight the need to reduce income inequality. Possible policy responses include progressive taxes on income and wealth, wider access to quality education for low-income groups, greater investment in public health, especially for disadvantaged women and female-headed households, and targeted transfer payments to support low-income women and girls. In addition, since good governance has a positive effect in the first regime, improving governance institutions is essential for promoting more inclusive and equitable development.
Ethical Consideration
Compliance With Ethical Guidelines
This research was conducted in accordance with ethical principles for human studies
Authors’ contributions
All authors have made substantial contributions to this study.
Funding
This study was not funded.
Conflicts of interest
The authors declared no conflict of interest.
Acknowledgments
In the present study, all ethical considerations, including the conditions of trustworthiness, honesty, and non-plagiarism, were observed, also we would like to thank all those who contributed to this study.
Asongu, S., & Odhiambo, N. (2021). Thresholds of income inequality that mitigate the role of gender inclusive education in promoting gender economic inclusion in sub-Saharan Africa. Social Responsibility Journal, 17(1), 106-126. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3496346
Asongu, S. A., & Odhiambo, N. M. (2020). Inequality thresholds, governance and gender economic inclusion in sub-Saharan Africa. International Review of Applied Economics, 34(1), 94-114. https://ideas.repec.org/a/taf/irapec/v34y2020i1p94-114.html
Munir, K., & Kanwal, A. (2020). Impact of educational and gender inequality on income and income inequality in South Asian countries. International journal of social economics, 47(8), 1043-1062. https://ideas.repec.org/a/eme/ijsepp/ijse-04-2020-0226.html
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Received: 2025/07/4 | Accepted: 2026/04/11 | Published: 2026/05/31
Received: 2025/07/4 | Accepted: 2026/04/11 | Published: 2026/05/31
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