Political economy
somayeh nematollahi; Farshad Moameni; Alireza Garshasbi
Abstract
This article aims to investigate the effect of regulatory level on the growth of industrial added value and compare it in developed and developing countries. For this purpose, the estimation of a non-linear equation with the panel GMM method and delta method has been used for the years 2000 to 2019. ...
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This article aims to investigate the effect of regulatory level on the growth of industrial added value and compare it in developed and developing countries. For this purpose, the estimation of a non-linear equation with the panel GMM method and delta method has been used for the years 2000 to 2019. The estimation results in a sample of 99 countries show an inverted U-shaped relationship between regulatory variables and industrial growth, and for about 67% of the sample observations, the level of growth regulation has increased and its effect on industrial growth is positive and significant. . Also, in this example, the growth maximization level for regulation was 2.61 (on a scale of 0-10). Another important result is that the nature of the relationship between regulation and industrial growth in developed countries is fundamentally different from developing countries. In particular, while the model estimate for developing countries is consistent with the findings related to the total observations and is in the form of an inverted U relationship, the findings related to developed countries are completely different and the maximizing level of industrial growth for these countries It was not observed that the reason is related to institutional differences in these two spectrums.
Economic Development
Mahya Allahgholi; Farshad Momeni
Abstract
The Economic Complexity Index (ECI) can be considered as a development indicator, given its superior predictive power in predicting economic growth and income inequality. However, it suffers from shortcomings such as the inability to distinguish differences in the complexity levels of economies. This ...
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The Economic Complexity Index (ECI) can be considered as a development indicator, given its superior predictive power in predicting economic growth and income inequality. However, it suffers from shortcomings such as the inability to distinguish differences in the complexity levels of economies. This highlights the need for a theoretical model to explain the ECI. Within the framework of the social orders approach, the type of social order is identified as a key distinction between developed and developing economies. Using a descriptive–analytical method, this study aimed to identify the influential factors of the ECI. In this respect, three key variables were examined: the state of property rights, the business environment, and the type of people’s access to organizations. The analysis focused on Iran’s ECI over a ten-year period (2010–2020), alongside three other indices, namely International Property Rights, Ease of Doing Business, and Economic Freedom— as an estimates of the chosen variables. According to the results, the International Property Rights Index, compared to the other two indices, has the strongest positive correlation with the ECI.IntroductionAssuming stable conditions, the Economic Complexity Index (ECI) measures a country’s production capacity and its potential future development by analyzing the information about its exports. Countries that produce and export more diverse and unique products tend to have more complex economies, leading to higher economic growth prospects and reduced inequality. Such countries manage to produce better and smarter products by sharing knowledge among citizens and reintegrateing knowledge within institutions, organizations, and groups. However, the ECI does not explain why some economies become more complex over time while others do not. Understanding these dynamics requires more in-depth studies of various economic conditions and factors influencing the ECI. Using the social order approach as an analytical framework, the present research aimed to explore why Iran’s economy has failed to improve in the ECI rankings over recent years. A key determinant of economic complexity is productive knowledge. This kind of knowledge manifests in the variety of existing companies, the range of jobs required to sustain them, and the level of interaction between companies within the society. Therefore, understanding differences in the levels of economic complexity and their future trajectories depends on how effectively these economies expand the total pool of knowledge, as in increasing the diversity of knowledge available to people and enterprises and fostering conditions that enable its integration through organizations, which serve as human interaction networks.In their analysis of social orders vis-à-vis violence control, North et al. (2009) categorized countries into two types: limited access (natural states) and open access. The key distinguishing factor of an open access order is the presence of competition at all economic and political levels. Based on this approach, three levels of explanation can be proposed to account for differences in economic complexity and the processes these countries undergo. The first level concerns the type of people’s access to organizations. In an open access order, this access provides opportunities for economic entrepreneurs to engage in creative destruction. Within this structure, entrepreneurs can advance toward more complex products by modifying existing production processes or developing new products through investment in human capital and the accumulation of physical capital by shifting the boundaries of existing knowledge. The second level focuses on the business environment, which influences the motivations of individuals and companies. The business environment within a society is considered as a key factor shaping individual and corporate choices to diversify knowledge and learning. Finally, the third level addresses transaction costs associated with integrating knowledge within organizations. Given that transaction costs and property rights are measured by similar criteria, the third key factor influencing economic complexity is the state of property rights.Materials and MethodsThe theoretical–conceptual model illustrating the relationship between three factors influencing economic complexity is shown in Figure 1. To assess the type of people’s access to organizations, the business environment, and property rights, the following indices were used: the Economic Freedom Index from the Heritage Foundation, the Ease of Doing Business Index from the World Bank, and the International Property Rights Index. The research adopted a descriptive–analytical method and conducted data mining using Power BI and Excel. It is important to note that some data on sub-indices for Iran are incomplete or inaccurately estimated. Consequently, using them in a model to study Iran’s economy may lead to errors. Therefore, this study is limited to analyzing existing trends.Figure 1. The theoretical–conceptual model of the relationship between property rights, business environment and people’s access to organizations with economic complexity Source: Research findingsResults and DiscussionAccording to the Atlas of Economic Complexity, in 2020, Iran ranked 85th out of 133 countries, with an economic complexity index of -0.39. Over the past decade, the index has shown only a slight improvement, and Iran’s ranking has risen by 11 points. Given the significant share of fuels in Iran’s exports, an analysis of this sector alongside the economic complexity index trend revealed that a decline in the fuel sector’s share generally coincided with an improvement in complexity index. However, the lack of improvement in Iran’s ECI—despite a decrease in the fuel sector’s share in 2012, 2015, and 2019—can be attributed to the addition of more low-complexity goods to the export basket during those years. Conversely, the increase in the fuel sector’s share in 2017, alongside no change in the complexity index compared to 2016, resulted from the inclusion of products with positive complexity in the export basket that year. According to the findings, the improvement in Iran’s ECI resulted from the improvements in the sub-indices of political stability, registering property, and patent protection (in the International Property Rights Index), protecting minority investors, dealing with construction permits, and getting electricity (in the Ease of Doing Business Index), as well as governance integrity and trade freedom (in the Economic Freedom Index). Additionally, the study found that the ECI has a positive and moderate correlation with the International Property Rights Index (0.49), the Ease of Doing Business Index (0.55), and the Economic Freedom Index (0.41). The correlation coefficients of these indices with Iran’s ECI were found to be 0.52, 0.21, and 0.48, respectively.ConclusionThis study used of the social order approach as a theoretical framework, which significantly contributed to a better understanding of the factors influencing the ECI. The analysis also demonstrated that the International Property Rights Index provided a better explanation of the trend in Iran’s ECI compared to the other two indices.
Political economy
Farshad Momeni; Hojjatollah Mirzaei; Ali Jafari Shahrestani
Abstract
AbstractBefore the 1990s, political economy theories typically presumed the security of property rights. The significance of property rights as an underlying factor in economic growth and development was first recognized by new institutional economists and has since gained further attention. The current ...
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AbstractBefore the 1990s, political economy theories typically presumed the security of property rights. The significance of property rights as an underlying factor in economic growth and development was first recognized by new institutional economists and has since gained further attention. The current research examined Marxist and methodological individualism approaches within political economy that have been used by several scholars to explain the main causes of underdevelopment in Iran, with a particular focus on property rights. A common weakness of these approaches is their neglect of Iran’s unique historical context and their failure to present an independent theory addressing the inefficiency of property rights in Iran’s history. The present study suggested that the new institutional approach, which incorporates historical analysis and the study of societal institutions, could offer a more comprehensive understanding of the role of property rights in underdevelopment. Rather than simply analyzing a series of historical events and geographical features, the proposed approach emphasizes several specific aspects of Iran that must be considered. These include the country’s unique climatic conditions, particularly the scarcity of water, which has led to significant tensions. Additionally, the impact of these climate conditions on political and economic systems (the theory of government) has shaped nomadic and tribal lifestyles and contributed to the formation of tribal governments. This, in turn, has influenced the underdevelopment of property rights (the theory of property rights) in Iran.1. IntroductionBefore the 1990s, political economy theories typically presumed the security of property rights. The significance of property rights as an underlying factor in economic growth and development was first recognized by new institutional economists and has since gained further attention. The current research examined Marxist and methodological individualism approaches within political economy that have been used by several scholars to explain the main causes of underdevelopment in Iran, with a particular focus on property rights.2.Materials and Methods Drawing on the institutional political economy framework, the present study employed a descriptive–qualitative method and library research to examine the theoretical models of Marxist political economy and the ideas grounded in methodological individualism. The former is represented through Iranian feudalism and the Asian mode of production, while the latter is expressed through the concept of unsuccessful libertarianism. These models have been used by several scholars to analyze the causes of Iran’s underdevelopment, with a particular focus on property rights.3. Results and DiscussionThe analysis focused not only on the theoretical inconsistencies of the models, but also on their contradictions with the historical records of Iran’s economy, as outlined in the following table: Table 1. Characteristics of Political Economy Approaches Used to Explain Iran’s UnderdevelopmentPolitical economy approachTheoryThinkerMost important featuresPosition of property rights in theoryCriticismsMarxismFeudalismPetrushevskyNomaniValiThe emergence of the autocratic government as the biggest ownerThe existence of the lord-serf systemAt the disposal of the royal family, nobles and dependentsThe absence of slavery in the history of IranThe existence of small ownership in the history of IranThe disproportion between the ownership of the state over the means of production and the ownership of the feudal lords over itThe absence of stable legal relationship between different classes and the government in IranThe absence of aristocracy in Iran and the complete dependence of property on the monarchyThe Asian mode of productionAshrafKatouzianSeifEmphasis on water scarcity and the unique role of the government to provide the needed resourcesSubjected ownership to the will of the autocratic governmentLack of formation /independence of social classesLack of market exchangesThe slow growth rate of productive forcesAt the disposal of the kingFailure to pay attention to the complexities and special conditions of each societyIncompatibility of the hypothesis of self-sufficient villages with autocratic governmentThe existence of other forms of ownership (private and endowment) in the history of IranNo historical record of government investment in water projects in IranMethodological individualismUnsuccessful libertarianismTabibian, Ghaninejad, AbbasiEmphasis on individual freedoms as the basis of property rights and intellectuals’ historical lack of attention to itRepeated emergence of tribal and patriarchal tyranny as the dominant model of all the events of contemporary Iranian historyHarmony between individual desires or interestsThe emergence of interventionist state due to the continuity of traditional tribal values and its affinity with socialist collectivist idealsIntellectuals’ lack of attention to the importance of the issue and repression by the interventionist governmentNeglect of the role of history and institutions on the decision-making of agentsLimited rationality, incomplete information and uncertainty about the futureExistence of transaction costsFailure to establish the assumption of a neutral contractual government and the history of the tribal government in form and content until the early Qajar period (the plundering government)The lack of application of neoclassical models in non-competitive conditions that form the major part of economic historySource: Research resultsBased on the theoretical models reviewed in the table above, several key theoretical flaws in were identified in the theories. First, given the existence of private ownership and endowment, state ownership has not been dominant throughout Iran’s history. Second, the models failed to consider the impact of Iran’s dry, water-scarce climate, which played a crucial role in shaping tribal life, collective agricultural cooperation, and the subsequent underdevelopment of private property. Third, these models overlooked the persistently tribal nature of government in Iran, which has influenced the political and economic landscape. Another significant flaw is the predatory nature of the government in Iran, which has historically focused on maximizing rents and self-preservation rather than investing in productive inputs. Finally, the models failed to address the lack of a stable and consistent relationship between different social classes and the government, as well as the absence of secure property rights for all classes.Table 2. A Comparison of Political Economy Theories Concerning Iran’s UnderdevelopmentTheoryWater scarcity and the dispersion of villagesSupremacy of collective/state ownershipThe use of lands for rent distributionThe existence of private property and endowmentTyranny and irregular relations between the government and social strataFailure to secure property rightsShareholding system in agricultureTribal structure of the political powerFeudalism * * The Asian mode of production** ** Unsuccessful libertarianism * ** *Source: Research results4. ConclusionA key weakness of these approaches is their failure to account for Iran’s unique historical context and their inability to present an independent theory explaining the inefficiency of property rights in Iran’s history. To address this gap, the new institutional approach, which emphasizes historical analysis and the study of societal institutions, can provide a more comprehensive understanding of the role of property rights in underdevelopment by going beyond simply examining a series of historical events and geographical features. The present analysis suggests focusing on specific aspects of Iran, such as its unique climatic conditions, particularly the scarcity of water, which has been a major source of tension. Additionally, the impact of these climatic conditions on the political and economic systems (the theory of government) has shaped nomadic and tribal lifestyles, as well as tribal governments. Finally, the influence of these political and economic structures on the underdevelopment of property rights (the theory of property rights) should also be considered.
Game theory
Farshad Momeni; Reza Shohreh
Abstract
Over the past half-century, the impact of the prisoner’s dilemma has transcended its initial boundaries, influencing a broad spectrum of institutional studies and analyses of interdependent systems, such as collective action, public goods, governance of the commons, social norms, and social capital. ...
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Over the past half-century, the impact of the prisoner’s dilemma has transcended its initial boundaries, influencing a broad spectrum of institutional studies and analyses of interdependent systems, such as collective action, public goods, governance of the commons, social norms, and social capital. Given this extensive influence, the latent fundamental flaws in this model can lead to misleading result for researchers and policymakers. As a descriptive–analytical research, the present study employed evolutionary game theory to examine the shortcomings of the iterative and evolutionary prisoner’s dilemma. It went on to introduce an alternative framework to explain the emergence and transformation of institutions. The critical discussion highlighted fundamental deficiencies of the prisoner’s dilemma manifested in four distinct levels of institutional analysis: the definition of institutions, identification of their function, explanation of their emergence, and description of their transformations. Consequently, the model is not capable of explaining institutional issues mentioned above. Addressing the role of uncertainty and considering the impact of small-world networks on payoff distribution, the second part of the study used a semi-parametric stag hunt matrix to model the cooperation problem. The results indicated that the non-spontaneous overlap between strong and weak ties can accumulate synergistic flows between content and structure, creating an environment conducive to institutionalizing capacity for achieving public goods on a large scale. Therefore, the process of overcoming social traps begins not with the punitive rules proposed by the prisoner’s dilemma, but with synergetic institutions that enhance the opportunity to discover common interests.IntroductionThe relation between institutions and development has been well recognized for quite some time. Numerous studies have delved into collective action, public goods, the governance of the commons, informal institutions, social capital, and the like. These areas serve as a common ground between two realms of economics: the theory of institutions and game theory. However, the majority of game theory studies are based on the assumption that the payoff distribution follows the prisoner’s dilemma. In the payoff matrix of the prisoner’s dilemma, the additional benefit of unilateral non-cooperative action results in a dominant strategy, preventing rational players from attaining the mutual benefits of cooperation. The central question in this literature is: how have human beings successfully established society and built civilization? There are three general solutions in the literature on the iterative and evolutionary prisoner’s dilemma. The initial solution, incorporating concepts like meta-game, folk theorem, reputation effect, and the norm of reciprocity, asserts that if the game repeats endlessly, cooperation becomes a foresight-driven choice. Contrary to this approach that suggests a form of spontaneous order, some sociologists argue that negative externalities of individual actions cannot be resolved by foresight or reciprocity, so the evolution of cooperation is only achievable through authoritative relations and punitive norms. The third solution, rooted in a biological assumption, contends that the prisoner’s dilemma can be solved through instincts without the need for rationality. The current article critically examined each of these approaches, and then introduced another payoff distribution matrix to explain how cooperation evolves in human society.Materials and MethodsThis study used a descriptive–analytical method as well as evolutionary game theory.Results and DiscussionThe article can be categorized into two main sections: the critical discussion and modeling. In the critical discussion, the results drawn from agent-based networks indicated that, even in the case of an endlessly repeating game, the emergence of the first cooperators would remain unexplained within the specific payoff matrix. Then, it was demonstrated that a substantial gap between theory and observation arises due to the inadequacy of the Prisoner’s dilemma in representing uncertainty. The discussion also addressed the contradiction stemming from overlooking the institutional context, particularly in defining reciprocity and explaining the emergence of norms. Moreover, the discussion highlighted some tautologies hidden in these definitions and explanations. Finally, three reasons were presented to underscore that the biological approach falls short of explaining how cooperation evolves in small-world networks.The discussions highlight fundamental deficiencies in the prisoner’s dilemma across four distinct levels of institutional analysis: the definition of institutions, identification of their function, explanation of their emergence, and description of their transformations. At the definitional level, the logic is fundamentally flawed due to its oversight of uncertainty as well as the mere emphasis on non-cooperative payoffs. Concerning the identification of function, the model predominantly stresses control and punishment, neglecting synergetic institutions that enhance opportunities to discover common interests, foster social synthesis on a large scale, lay the foundation for social contracts, and legitimize punitive rules. Moreover, an evolutionary model can only explain the endogenous emergence and transformation of institutions if it first demonstrates how a payoff matrix, where non-cooperation is a dominant strategy, can create a sustainable learning process. According to the results of agent-based networks, such a process cannot be explained in the prisoner’s dilemma.Nevertheless, evolutionary models, by sidestepping the assumptions of perfect rationality and information, possess a suitable capacity for studying interdependent systems and institutional analysis. Therefore, an alternative model can be formulated by implementing some reforms, including the utilization of the stag hunt matrix to account for uncertainty, incorporating small-world networks to better align with human societies, and ultimately introducing a semi-parametric payoff matrix to incorporate the influences of social structures.The results from the revised stag hunt model showed that the non-spontaneous overlap between strong and weak ties can accumulate synergistic flows, creating a conducive environment to institutionalizing capacity for achieving public goods on a large scale. Therefore, the process of overcoming social traps begins not with the free ride punishments proposed in the prisoner’s dilemma, but with synergetic institutions that enhance the opportunity to discover common interests.ConclusionThe prisoner’s dilemma describes a great challenge concerning micro-level conflicts of interest. However, using this model to explain the emergence and transformations of institutions is bound to yield highly misleading results for researchers and policymakers. Instead, the theoretical framework proposed in this study should find application across a broad spectrum of institutional studies, including analyzing the impacts of inclusive institutions on overcoming social traps, designing society-oriented methods for governing the commons, explaining the accumulation and modeling the measurement of social capital, and examining the social consequences of economic inequality.Keywords: Institutions, Cooperation Problem, Evolutionary Game Theory, Prisoner’s Dilemma, Stag HuntJEL Classification: C73, O43.
Economic Development
Hossein Rajabpour; Farshad Momeni; Ali Nasiri Aghdam
Abstract
This article considers the effect of fiscal policy on inclusive development. Inclusive development is one of the concepts that has been introduced in the development economics literature in the last decade and especially with emphasis on the social and political aspects of development, the distribution ...
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This article considers the effect of fiscal policy on inclusive development. Inclusive development is one of the concepts that has been introduced in the development economics literature in the last decade and especially with emphasis on the social and political aspects of development, the distribution of development achievements among different sections of society is in focus. Since fiscal policies are one of the main instruments of the government to eliminate deprivation and imbalances, it is important to understand the effectiveness of these policies in this regard. In this study, the components of fiscal policy include the combination of expenditures and revenues and its effect on inclusive development in the period 1981-2018 in the form of two models of structural vector auto-regression has been studied. Findings show that most components of government fiscal policy except economic expenditures do not have a significant effect on the index of inclusive development and these economic expenditures have a negative impact on inclusive development. The results show that the government's fiscal policies have failed to achieve or accelerate inclusive development, and despite its legal mission, the government has not been successful in comprehensive expanding welfare and extending it to all social groups. Historical analysis also shows that since the beginning of the 2010s and with the intensification of sanctions and currency fluctuations, the relationship between fiscal policy and the index of inclusive development has been weakened. It seems that the reform of the budgeting process and the simultaneous attention to the two constraints of equality and sustainability in growth and development targeting for fiscal policy on inclusive development is essential.
Banking
Farshad Momeni; Abbas Shakeri; Javad Taherpoor; Behnam Ezati Ekhtiar
Abstract
In some economic theories emphasizing the positive relationship between financial and real sector development in economy, privatization of financial markets and institutions and increasing private sector share is the dominant approach to financial development. However, private banks performance in some ...
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In some economic theories emphasizing the positive relationship between financial and real sector development in economy, privatization of financial markets and institutions and increasing private sector share is the dominant approach to financial development. However, private banks performance in some countries have shown different results compared to the goals had been set. Lack of proper economic and institutional environment has led to adverse results of private banks. Considering mentioned issues, this study aims to assess the impact of private banking on the economic growth rate in Iran based on the seasonal data form 2003 till 2018 using Autoregressive Distributed Lag (ARDL) technique. Results of the study have shown that financial development has a positive impact on the growth rate of economy, while, as the market share of private banks has increased, it had a negative effect on the economic growth. The main cause of this negative relationship is undesirable institutional environment which private banks are working in. Therefore, preparing suitable institutional framework is a condition to gain the private banks’ advantages. Central bank constant supervision alongside the enforcement authority prohibiting private banks from managing economic firms and the presence in the alternative markets are the main preconditions.
Amir Jafarzadeh; Abbas Shakeri; Farshad Momeni; Ghahraman Abdoli
Volume 19, Issue 61 , February 2015, , Pages 1-29
Abstract
The following paper investigates European policy about importing natural gas from Caspian Sea countries. The Nabucoo and Trans-Caspian gas project are the two potential projects. For these pipelines three countries are candidates: Iran, Turkmenistan and Azerbaijan. By using the game theory framework, ...
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The following paper investigates European policy about importing natural gas from Caspian Sea countries. The Nabucoo and Trans-Caspian gas project are the two potential projects. For these pipelines three countries are candidates: Iran, Turkmenistan and Azerbaijan. By using the game theory framework, coalition among natural gas exporters for the Nabucco Project has been considered. Iran, Turkmenistan and Azerbaijan are three potential exporter countries. In this paper we answer the question whether three countries should enter the coalition for exporting gas to Europe or not. Moreover, we accounted bargaining power of these countries. We conclude that all countries have profits to make the coalition for gas exporting in the Nabucoo project. Iran has more bargaining power than others so Iran can play an important and active role for exporting gas to Europe in the Nabucco project.
Farshad Moameni
Volume 1, Issue 1 , April 1995, , Pages 27-55
