Threshold Regression

Financial development has been the main factor for economic development in different countries, and the causal relationship between financial development and economic development is part of the macroeconomic relations that have been examined many times. Yet studies on fishermen's poverty have rarely been done. Many residents of coastal villages are engaged in fishing activities. Small-scale fishing on various coasts in the north of Iran is an important source of employment, income and nutrition for coastal villages. This characteristics and effects have not been well examined. This study has investigated the poverty of Iranian fishermen in Gilan, Mazandaran and Golestan provinces due to changes in financial development.. The study was based on the Threshold Vector Auto Regression (TVAR), between 2000 to 2020. The research results confirm the existence of a nonlinear relationship between financial development and poverty. A significant relationship between financial development and income distribution was also confirmed on the poverty of northern Iranian fishermen.

Understanding the impact of financialization on the economy is crucial for policymakers seeking to design strategies that enhance social welfare. This study examines the effect of financialization on economic welfare in Iran from 1990 to 2023, employing a threshold regression approach to account for nonlinear dynamics. The results reveal a threshold level of institutional quality at 57%. Across both, i.e., low and high institutional quality regimes, financialization exerts a negative and significant influence on economic welfare. However, once institutional quality surpasses the threshold, the adverse impact of financialization intensifies markedly. Findings highlight the paradoxical role of institutional quality, showing that greater financialization consistently undermines welfare in Iran, with stronger institutions amplifying rather than mitigating its negative effects. It means that in environments with higher institutional quality, advanced financial instruments and capital markets develop; however, access to financial development is usually asymmetrical. Consequently, wealthy individuals and large corporations benefit the most, while low-income households receive minimal benefits and may even suffer from asset inflation or consumer debt. Thus, strong institutions do not necessarily prioritize public welfare. Policymakers may regulate to develop financial markets in a way that prioritizes the financial sector’s profitability over social interests. This mechanism can lead to financial sector growth occurring faster than the real economy’s capacity, ultimately undermining welfare.