The balance between economic development and environmental sustainability is a fundamental determinant of sustainable development. Moreover, the optimal industrial structure is a key factor influencing both economic growth and the transition to a green economy. In this respect, the present study examined the impact of industrial structure on green economic efficiency. It applied a spatial Tobit approach to analyze the provincial data from Iran over the period 2011–2020. The results of the data envelopment analysis (DEA) indicated that Kohgiluyeh and Boyer-Ahmad and Isfahan provinces—with green efficiency scores of 1.00 and 0.60, respectively—had the highest and lowest levels of green economic efficiency. Furthermore, the Ellison–Glaeser index revealed that Qom and Qazvin provinces had the highest levels of industrial diversification, whereas Bushehr province exhibited the greatest degree of industrial concentration. Finally, the results of model estimation based on the spatial Tobit approach showed that both industrialization and industrial concentration had negative effects on green economic efficiency. However, the interaction between industrialization and industrial concentration had a positive and statistically significant effect on green economic efficiency. These findings suggest that increasing the share of industry in the economy while promoting industrial concentration based on each province’s comparative advantages should be considered key policy priorities to enhance green economic efficiency.
Introduction
The industrial sector plays a vital role in Iran’s economic development while also being a major source of energy consumption and environmental pollution. This dual role highlights the challenge of sustaining economic growth without exacerbating environmental degradation. Consequently, reducing the environmental impacts of industrial activity without compromising economic growth requires reforms in both the technological structure of industry and the optimal spatial allocation of industrial activities. It is thus necessary to examine how these factors influence green economic efficiency in order to design policies that support both economic development and environmental sustainability.
The present study aimed to examine the impact of industrial structure and the geographical distribution of the industrial sector on green economic efficiency in the provinces of Iran during 2011–2020. The analysis focused on how industrial geography and structure could contribute to improving green economic efficiency. Given the importance of regional interdependence and spatial spillover effects among provinces, the study employed provincial data and spatial econometric models to examine the role of the industrial sector in simultaneously promoting economic growth and improving environmental quality.
Materials and Methods
The current study required the measurment of both industrial structure and green economic efficiency. It used the Ellison–Glaeser index to measure industrial structure. A key advantage of this index is that it accounts for both natural advantages and spillovers when measuring industrial concentration. The index ranges from −1 to 1, where negative values indicate the spatial dispersion of industrial production across regions, and positive values indicate industrial concentration.
The second step involved measuring green economic efficiency. Two widely used approaches for efficiency measurement are stochastic frontier analysis (SFA) and data envelopment analysis (DEA). Compared with SFA, DEA offers the advantage of not requiring the model specification; moreover, it is based on linear programming techniques. In contrast, SFA relies on a predefined functional relationship between inputs and outputs. Given its advantages, DEA was adopted in this study to estimate green economic efficiency. Once industrial structure and green economic efficiency was measured, the relationship between them could be empirically examined.
The data was obtained from regional statistics, statistical yearbooks, and reports on industrial establishments with ten or more employees published by the Statistical Center of Iran. Moreover, the study employed a spatial Tobit model to estimate the determinants of green economic efficiency. The Tobit specification is appropriate because the dependent variable (i.e., green economic efficiency) is a bounded continuous variable, with efficiency scores constrained to lie between 0 and 1.
Results and Discussion
The results indicated that economic growth had a positive and statistically significant direct effect on green economic efficiency, suggesting that production growth exceeded the rate of carbon dioxide emissions. However, the indirect spatial effect was found to be statistically insignificant, implying that economic growth in neighboring provinces does not generate spillover effects on green economic efficiency. This result reflects the heterogeneity of production processes across provinces and the limited transfer of technology among provinces
Urbanization exhibited neither significant direct nor indirect effects on green economic efficiency. This finding suggests that the potential advantages of urbanization, such as labor specialization and skill diversity, are offset by its associated disadvantages, including traffic congestion and environmental pollution. The absence of a significant relationship may also reflect the mismatch between labor market skills and employment opportunities, as well as the failure to fully exploit economies of scale in urban transportation systems.
Industrial concentration, measured by the Ellison–Glaeser index, had negative and statistically significant direct and indirect effects on green economic efficiency. This finding indicates that industrial concentration alone reduces green economic efficiency, largely because industrial agglomeration in Iran has not been accompanied by strong inter-industry linkages or efficient interprovincial supply chains. As a result, industries remain structured as siloed or fragmented. Similarly, industrialization, measured by the share of industry in GDP, exerted negative direct and indirect effects on green economic efficiency. This result suggests that expanding the industrial sector without technological upgrading or environmental improvements reduces green economic efficiency.
Financial development did not have a statistically significant direct or indirect effect on green economic efficiency. This suggests that the financial system has not effectively supported the adoption of cleaner technologies or environmentally sustainable investments. International sanctions, exchange rate volatility, persistent inflation, and the relatively high returns available in non-productive markets have likely diverted financial resources away from green investments and modern technologies.
As supported by the findings above, although industrialization and industrial concentration individually reduce green economic efficiency, their interaction has a positive and statistically significant effect, both within provinces and through spatial spillovers to neighboring provinces. In other words, industrial development can enhance green economic efficiency when it is accompanied by the geographical concentration of industrial activities. Such a combination promotes economies of scale, intensifies competitive pressures to improve energy efficiency, encourages greater investment in research and development, and facilitates technological upgrading. These findings imply that industrial policy should prioritize the geographically concentrated development of industries based on the comparative advantages of individual provinces.
Conclusion
According to the results of model estimation, Iran’s current industrial structure is fragmented. Nevertheless, the findings showed that the combination of industrialization and industrial concentration would be a key driver of improvements in green economic efficiency. When considered separately, both industrial concentration and an increase in the industrial share of output reduce green economic efficiency. However, industrial concentration mitigates the adverse effects of industrialization, and their interaction has a positive effect on green economic efficiency. Industrial concentration enhances green economic efficiency only when industrialization reaches a scale that generates economies of scale in research and development and accelerates technological progress. Accordingly, expanding the industrial sector while promoting industrial concentration based on provincial comparative advantages is a key policy for improving green economic efficiency. In addition, using economies of scale in public transportation as cities expand and directing financial resources toward technology-oriented investments are essential policy measures for achieving green economic efficiency.