Political economy
Hossein Tavakolian; reza talebloo; Shaghayegh Abasali
Abstract
Despite, the measures for improvement of the State budget system in the current economic situation in Iran, no improvement has been taken. As, the relationship between beneficiaries of the budget included the government, parliament, regulatory bodies, and people as the final beneficiary of budget, has ...
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Despite, the measures for improvement of the State budget system in the current economic situation in Iran, no improvement has been taken. As, the relationship between beneficiaries of the budget included the government, parliament, regulatory bodies, and people as the final beneficiary of budget, has not regulated properly, therefore, transparency and accountability of the various officials of the government has been decreased. In this paper, we study budgetary and off-budgetary operation of the government and its impact on inflation with emphasis on fiscal dominance via banking system, using Generalized Methods of the Moments (GMM) trough 1372-1397. The results indicate that increasing the fiscal dominance via the debt channel of banking system has positive effect on inflation thus, fiscal dominance via banking system has been proved. Also, the results confirm the negative relationship between political stability and control of corruption on inflation. This variable has been in a low level during the sample period which requires the attention of government in all areas and political factions of country.
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.
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.
Political economy
Vahid Azizi; Bakhtiar Javaheri; Fateh Habibi
Abstract
AbstractEconomic growth and development, as the primary goals of any country, play a crucial role in improving living standards and promoting sustainable development. Efforts to achieve these goals, and consequently increase per capita income, can ensure the enhancement of economic and social well-being ...
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AbstractEconomic growth and development, as the primary goals of any country, play a crucial role in improving living standards and promoting sustainable development. Efforts to achieve these goals, and consequently increase per capita income, can ensure the enhancement of economic and social well-being of a nation. However, natural and political crises can pose significant obstacles to achieving such objectives. Natural disasters and economic sanctions, in particular, can have devastating effects on economic growth and development, leading to a decline in per capita income. Using the Dynamic Ordinary Least Squares, the present study aimed to examine the effect of economic sanctions and natural disasters on non-oil per capita income in Iran from 1980 to 2022. The findings showed that, in the long-term, increases in natural disasters and economic sanctions had contributed to a decline in per capita income in Iran. Additionally, environmental innovation and the interaction between innovation and natural disasters positively influenced per capita income. The results also indicated that factors such as the labor force, physical capital, and trade openness had contributed to improvements in per capita income. In light of the findings, it is recommended that Iran implement effective plans and policies to mitigate the effects of sanctions and natural disasters, promote environmental innovations, and strengthen the development of fixed capital and the labor force, aimed at ensuring the continued growth of per capita income.IntroductionIn recent years, Iran has become a prominent case study and focal point in discussions about sanctions within global research and academic circles. This attention stems from Iran’s status as a target of both multilateral and unilateral sanctions campaigns, which have had adverse effects on its economy. The sanctions have led to currency devaluation; severe budgetary, commercial, and financial deficits; reduced foreign investment, skyrocketing inflation, and rising poverty rates. Natural disasters, meanwhile, are large-scale catastrophic events that intermittently strike, causing extensive human and infrastructural damage that impacts societies and economies alike. Natural disasters inflict significant damage on infrastructure, property, and industries, leading to reduced production, business disruptions, damage to manufacturing facilities, and interruptions in transportation systems. Due to their unpredictability, natural disasters have a substantial impact on the economy. The current study aimed to explore whether natural and political disasters pose genuine obstacles to economic growth and development in Iran. The primary research question is: What are the effects of economic sanctions, natural disasters, and environmental innovation on per capita income in Iran’s economy?Materials and MethodsTo meet the objectives, the study used an experimental model as defined in logarithmic form based on Equations (1) and (2) below. (1) (2)Per capita income (Y) was considered as the dependent variable, while the independent variables included economic sanctions (ES), natural disasters (ND), environmental innovation (EI), physical capital (K), labor force (L), trade openness (TO), and an interaction variable (ND×EI). In line with the research objectives, time series data spanning from 1980 to 2022 were utilized. The research model was analyzed using the Dynamic Ordinary Least Squares (DOLS) estimator in EViews software.Results and DiscussionTo analyze the results, a unit root test was first conducted to evaluate the reliability of the data. The results showed that the variables of trade openness (TO) and economic sanctions (ES) were at a stationary level, while the variables of per capita income (Y), physical capital (K), labor force (L), environmental innovation (EI), and natural disasters (ND) could be stationary with one time difference. Next, the Bayesian Information Criterion (BIC) was used to determine the optimal lag length. The presence of long-term relationships among the variables was then tested using the Augmented Engle-Granger cointegration test and the Cointegrating Regression Durbin-Watson (CRDW) test, both of which indicated at least one long-term relationship among the variables. The DOLS method was then employed to estimate the research model (see Table 1). The findings revealed that economic sanctions (ES) had a significant and negative effect on per capita income (Y) in Iran’s economy. Specifically, a one percent increase in ES in Models 1 and 2 reduces non-oil per capita income by 0.108% and 0.063%, respectively. Additionally, the frequency of severe natural disasters (ND) had a significantly negative correlation with non-oil per capita income. A one percent increase in ND results in a reduction of 0.161% and 0.158% in non-oil per capita income. Conversely, environmental innovation (EI) had a significantly positive effect on per capita income, with a one percent increase in EI leading to a 0.032% rise in non-oil per capita income. The interaction variable (ND×EI) was also positive and significant, where a one percent increase in this variable results in a 0.025% increase in non-oil per capita income (Y). Furthermore, physical capital (K) had a significantly positive effect on non-oil per capita income. In this case, a one percent increase in K is associated with an increase in Y by 0.185% and 0.25% in Models 1 and 2, respectively. Labor force (L) also had a positive and significant effect on non-oil per capita income, with a one percent increase in L leading to an increase in Y by 0.611% and 0.518% in Models 1 and 2, respectively. Finally, trade openness (TO) had a positive effect on per capita income, as a one percent increase in TO results in a rise of 0.253% and 0.208% in non-oil per capita income.Table 1. Estimation Results of Research ModelsVariablesModel 1Model 2Coefficientst statisticCoefficientst statisticK0.1852.483**0.2505.140***L0.6113.887***0.5182.257***TO0.2534.462***0.2085.516***ES-0.108-2.119**-0.063-1.883*ND-0.161-4.946***-0.158-8.704***EI0.0322.359**--ND×EI--0.0254.745***C3.5332.028*4.2963.994***Note: ***, ** and * represent significance levels of 1%, 5% and 10%, respectively.Source: Research resultsConclusionThe research findings suggested that repeated political and natural disasters could drive a country and its economy into a period of stagnation. On the one hand, these events lead to the destruction of physical, human, and natural resources. On the other hand, they disrupt trade processes, halting the transfer of technology through imports and impeding the modernization of domestic industries. As a result, both outcomes contribute to a decline in per capita income. Moreover, the study showed that adopting environmental innovations could not only increase per capita income but also positively influence the relationship between natural disasters and per capita production, thus helping to mitigate the impact of such disasters. Therefore, investing in research, development, and innovation will strengthen the country’s ability to cope with and adapt to such challenges, while reducing risk levels. In conclusion, this study demonstrated that the political and natural disasters observed during the analyzed period hah negatively impacted the country’s economic growth and development, leading to a decrease in Iran’s per capita income.
Political economy
Alireza Raanaei; Rouhollah Shahnazi; Seyyed Aqil Hoseiny
Abstract
The history of modern Iran is marked by numerous movements and revolutions, primarily aimed at achieving a proper balance between the state and society. Despite significant efforts, Iranians have not yet reached the ideal equilibrium. This research aimed to provide a brief overview of modern Iranian ...
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The history of modern Iran is marked by numerous movements and revolutions, primarily aimed at achieving a proper balance between the state and society. Despite significant efforts, Iranians have not yet reached the ideal equilibrium. This research aimed to provide a brief overview of modern Iranian history and examine the pathways of progress for both the state and society. Utilizing an institutional analysis framework and the concept of institutional congruity, the study developed a new analytical framework to analyze the state–society interaction in Iran. A game theory approach was then used to examine various scenarios of the state–society interaction. The findings revealed that the depreciation, economy of scale, and instability of preferences are crucial factors in the dynamics between the state and society. However, the rate of time preference emerged as the most decisive factor, leading to three possible equilibriums: democracy, despotic Leviathan, and absent Leviathan.1.IntroductionAccording to Hegel, Iranians were historically the first people to establish a state, with their continuous history beginning with their empire (Hegel, 2004, p. 191). This continuous history narrates the dialectic between the state and society in Iran. The dynamics of this interaction can result in a stable equilibrium, an unstable equilibrium, or a fundamental disequilibrium. Given the unique nature of Iran, is it possible to achieve a balanced relationship where societal demands are met, and the state could provide ideal governance? How can we conceptualize the successive transformations and instability in the state–society interaction in contemporary Iran? Why did the Constitutional Revolution lead to Reza Khan’s dictatorship? Why did the secularization under Pahlavi II lead to the Islamic Revolution? How can we interpret this history of highs, lows, and turbulence? To address these issues, the present study aimed to explain the contemporary interaction between the state and society in Iran by using the institutional congruity framework and game theory. The goal was to present various possible equilibriums for Iran’s contemporary political economy. In other words, the research sought to elucidate the potential balance of the political economy in Iran based on the state–society interaction.2.Materials and MethodsIn the institutional balance between the state and society, a dynamic interplay is unfolding. Building on the model proposed by Acemoglu and Robinson (2023), this study attempted to derive various possible scenarios of the state–society interaction in Iran. Time is represented discretely, with the length of each period denoted as Δ>0. At time t, the variables from the previous period are as follows: where x represents the capacity of society, and s represents the capacity of state. At each point, society and the state are represented by a player. At any time, players simultaneously choose their investments , which determines their current capacity according to the following equations: For both the short-term state and society, various scenarios can be formulated regarding the presence or absence of depreciation and the oscillating nature of their inclinations. Consider the cost function for two players as follows: and 3.Results and DiscussionThe results suggest that beginning with low capacities for both the state and society can lead to a trajectory where a society starting with a weak state might directly evolve into one moving toward either a despotic Leviathan or an absent Leviathan. This dynamic is illustrated in the following phase diagram:Figure 1: First Scenario: The Short-Term Society In this scenario, it is evident that without depreciation, there is significant potential for Iranians to advance within a narrow corridor. However, as depreciation increases, this potential diminishes, eventually leading to a state of collapse (0, 0). Figure 2: Second Scenario: The Short-Term Society with Unstable Preferences The transformations in modern Iranian history show varying dynamics in both society and the state across different periods, reflecting differences in their types and levels of societal participation and efforts to achieve their respective goals. The high dynamics demonstrate that in a short-term scenario-assuming a depreciation rate of 0.1-if society is active (while the state is not), the predominant state tends towards anarchy. In the opposite scenario, the predominant state shifts towards a despotic Leviathan.Figure 3: Third Scenario: The Short-Term State The results of this scenario mirror those of the first scenario, highlighting the significant impact of depreciation on future possibilities. In contrast, the possibilities lean more towards a despotic Leviathan, whereas in the first scenario, the tendencies for a short-term society leaned more towards anarchy. Figure 4: The Short-Term State with Unstable Preferences In this scenario, similar to the second one, it is apparent that the efforts and engagement of both society and the state must be parallel and substantially proportional to each other. If either entity remains passive, the situation tends towards either pure despotism or anarchy.When it comes to time preference rates, it is crucial to consider the long-term, forward-looking perspectives of both the state and society. In the first scenario, the state is short-term and active with . Being active implies significant investment in the state capacity accumulation. In the second scenario, the state remains short-term and active with . These two situations were examined under two conditions: and .Figure 5: The Role of Time Preference in the Long-Run Equilibria of Iran’s Political Economy The above phase diagram effectively illustrates the significance of time preferences and their causal precedence in determining the state of the Leviathan in Iran. Even with depreciation and the short-term nature of both society and the state, achieving a stable equilibrium state (narrow corridor) is feasible when time preferences are appropriately aligned. Otherwise, depending on the short-term nature of either society or the state, the expected outcome will tend towards despotism or pure anarchy.4.ConclusionIn Iran, both society and the state must adopt a long-term rationality based on historical self-awareness to progress harmoniously. The primary challenges faced by Iranian society and the state stem from their short-term outlooks, as reflected in their time preferences. Whether society or the state prioritizes short-term goals, it becomes evident that depreciation significantly limits the possibility to enter the narrow corridor of stability. When both the state and society fail to coordinate efforts— whether in the short-term society or short-term state—it often leads to either pure despotism or anarchy. Despite the depreciation, economies of scale, and instability of preferences, it is the rate of time preferences that ultimately determines whether entry into the narrow corridor is feasible. Furthermore, this rate of time preferences dictates whether the equilibrium state leans towards a despotic Leviathan or an absent one, contingent upon the economies of scale achieved by both the state and society.
Political economy
Abolfazl Shahmohammadi; Mohammad Ali Feizpour; Mehdi Hajamini; Mohammad Abedi Ardakani
Abstract
Many studies have evaluated political power from a qualitative and quantitative perspective. But the present study tries to provide a quantitative criterion for calculation of power. To do this, using the country’s budget law, the institutions that enjoys from national budget are identified and ...
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Many studies have evaluated political power from a qualitative and quantitative perspective. But the present study tries to provide a quantitative criterion for calculation of power. To do this, using the country’s budget law, the institutions that enjoys from national budget are identified and then the officials who are at the head of those institutions from each province are identified. Then the importance coefficient of each official is calculated based on multiplication of two indicators: the allocated budget to his/her institution or organization and the duration of his/her tenure in each year. The power matrix for each province is made. Finally, the power index for Iranian provinces is calculated using methods of Simple Additive Weighting, TOPSIS, and Numerical Taxonomy. Then, according to TOPSIS method, the regions of Iran were divided into four groups. The findings show fundamental inequalities in the distribution of economic- political power in the regions of Iran during the period of 2009-2019. Also, The most fluctuations in economic-political power index have occured mainly in the middle groups. Since, most previous studies have emphasized regional inequalities in Iran based on various indicators, it seems that there is a correlation between the distribution of economic-political power and regional inequalities of Economic development. As a result, given the current status without change in the political power of the provinces, one can not expect a significant change in the economic development of the regions.
Political economy
Behrouz Sadeghi Amroabadi; Ehsan Kazemi
Abstract
Improving the quality of institutions with development of the country's economic infrastructure can reduce the degree of fiscal policy cycles in developing countries. Therefore, the purpose of this study is to analyze the effects of good governance and political cycles on the liquidity and budget deficit ...
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Improving the quality of institutions with development of the country's economic infrastructure can reduce the degree of fiscal policy cycles in developing countries. Therefore, the purpose of this study is to analyze the effects of good governance and political cycles on the liquidity and budget deficit changes during 1978-2018. The research method is descriptive analytical by using econometric method of the GMM. Data are from the Central Bank of Iran and World Bank site for Iranian Economy. The research results show the effect of good governance on the variables of liquidity and budget deficit changes are negative and significant. Also the interactive effects of good governance and the election dummy variables on the liquidity and budget deficit changes are negative and significant. These results indicate that good governance during the elections can control the budget deficit and liquidity changes, hence to control the business-political cycles, suggest to improve the good governance in Iran.
Political economy
Salman Gharakhani; Mohsen Renani; Zahra Karimi
Abstract
One of the prevalent theoretical models for understanding the historical roots of the underdevelopment of various societies is the new institutionalist theory of institutional quality improvement which emphasizes the fundamental origins of economic growth. According to this theory, societies with inclusive ...
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One of the prevalent theoretical models for understanding the historical roots of the underdevelopment of various societies is the new institutionalist theory of institutional quality improvement which emphasizes the fundamental origins of economic growth. According to this theory, societies with inclusive institutions will experience a sustainable economic growth and development by creating a creative destruction process and a generative rent distribution while moving toward evolutionary cycles. Societies with extractive institutions, however, will lag behind and decline in the long run due to the dominance of rent relations and the non-generative rent distribution while moving toward vicious cycles. During the second Pahlavi period, despite its short-term experience of economic growth, Iran moved to vicious cycles instead of evolutionary ones; therefore, in order to investigate this issue, the reasons for the lack of sustainable economic growth during this period will be addressed using the theory of institutional quality improvement. To this end, one of the most important institutional barriers to economic growth in this period will be addressed through examining the process of creative destruction on the political and economic market. The results of this study indicate that despite experiencing the short-term economic growth achieved under the shadow of extractive institutions during this period due to factors such as power struggles, dominance of personal relations over affairs, the non-generative rent distribution etc., the process of creative destruction did not take shape on the political and economic market, so that despite the abundance of sources of income and foreign aid, Iran could not maintain its economic growth and development.