institutional inefficiency

The Rentier State Theory, the Dutch disease Paradigm, and the natural resource curse are some of the dominant perspectives developed to explain the sociopolitical and economic conditions of oil-rich countries. But the important issues, neglected by these theoretical frameworks, are the high effects of intense budget dependence on oil revenues, revenue fluctuations, and the institutional framework in which policies are made. These factors determine the outcome of oil revenues to society and under this circumstance, efficient policies to deal with socioeconomic problems such as inequality are not taken. This paper aims to elucidate the mechanism of interaction between oil revenue dependency, income fluctuation, and the lack of efficient institutions to address the problem of inequality in Iran, an oil-rich country. We ask: what consequences has reliance on oil revenues had for inequality in post-revolutionary Iran?This study adopts a documentary analysis approach, relying on data drawn from reports issued by official institutions including the Central Bank of Iran, the Statistical Center of Iran, and OPEC to investigate the dynamics under consideration.The results demonstrate that both the extent and the trajectory of inequality in post-revolutionary Iran have been closely linked to fluctuations in oil revenues. Two important patterns are particularly noteworthy. First, during periods of revenue windfalls, the upper strata capture a disproportionate share of the benefits. Second, the economy’s structural dependence on oil income, together with the volatility inherent in such revenues and the absence of robust institutional frameworks, has entrenched persistent inequality, while simultaneously generating shifts in inequality that mirror the cyclical changes in oil revenues.