Identifying the Main Factors of Iran's Economic Growth using Growth Accounting Framework

TL;DR

This study analyzes Iran's economic growth from 1950 to 2018, highlighting the significant role of oil revenue and capital in growth fluctuations and steady state, using growth accounting methods.

Contribution

It provides an empirical growth accounting analysis specific to Iran, emphasizing oil's impact and quantifying the steady state of effective capital.

Findings

GDP per capita grew by 2% annually with fluctuations

Oil crises caused significant growth rate fluctuations

Capital contribution is crucial to Iran's economic growth

Abstract

This paper aims to present empirical analysis of Iranian economic growth from 1950 to 2018 using data from the World Bank, Madison Data Bank, Statistical Center of Iran, and Central Bank of Iran. The results show that Gross Domestic Product (GDP) per capital increased by 2 percent annually during this time, however this indicator has had a huge fluctuation over time. In addition, the economic growth of Iran and oil revenue have close relationship with each other. In fact, whenever oil crises happen, great fluctuation in growth rate and other indicators happened subsequently. Even though the shares of other sectors like industry and services in GDP have increased over time, the oil sector still plays a key role in the economic growth of Iran. Moreover, growth accounting analysis shows contribution of capital plays a significant role in economic growth of Iran. Furthermore, based on growth accounting framework the steady state of effective capital is 4.27 for Iran's economy.