Investigating the Effect of Oil revenue on Regional Convergence in Iran: (Spatial Econometric Approach)

Document Type : Research Paper

Authors

1 Ph.D. Student in Economics, University of Sistan and Baluchestan, Zahedan, Iran.

2 Associate Professor in Economics, University of Sistan and Baluchestan, Zahedan, Iran.

3 Assistant Professor in Economics, University of Sistan and Baluchestan, Zahedan, Iran.

10.22103/jdc.2020.15908.1094

Abstract

Objective: Regional convergence is one of the major challenges in developing economies. In Iran, the whole development programs before and after the revolution have not succeeded in creating a regional balance, and spatial polarization continues. One of the axes of regional convergence is oil and its revenues. The purpose of this study is to investigate the direct effects and spatial spillover of oil revenues on regional convergence in Iran based on the space Solow model. According to this model, less developed economies grow faster than developed economies and the result of this process is the convergence between regions.
 
Methods: The research variables include per capita income, oil revenue, and human capital, saving rate, population growth rate, and capital stock. To study the subject, have been used the latest data of the provinces of the country in the period 2005-2017. Connections between regions that are the outcome of natural needs and geographical, political, cultural, social, and economic commonalities can accelerate their development while providing the shortcomings of regions. In the regional economic literature, the convergence of per capita income growth in the regions is a function of the situation within the region and also the surrounding areas, which appears as spillover effects. Therefore, in regional studies, explanatory variables contain the dimension of place (space) and spatial relationship and have direct and indirect (spillover) effects on the dependent variable. Hence, it is necessary for growth and convergence studies to consider the dependence between regions. Since the use of location-based data in conventional econometrics is contrary to Gauss-Markov assumptions, therefore the Dynamic Spatial Durbin (DSDM) econometrics technique is used. To estimate the coefficients have been used Stata software.
 
Results: According to the results, the occurrence of regional convergence in the country is confirmed. So that the convergence speed is 0.062. Therefore, every year, the per capita income gap of the regions decreases by %6.2 and the regions move in the direction of balanced growth towards a steady-state situation. In other words, provinces with lower per capita incomes grow faster than provinces with higher per capita incomes, and in the long run, will decrease the per capita income gap between regions. Despite the positive and significant direct effect, the oil variable has a negative spillover effect on the regional convergence process. Other results show that among the influential factors, human capital has the highest direct effects and spillover on regional growth and convergence. Therefore, in Iran, investing in human capital and providing the necessary conditions to use its potentials has the greatest role in regional convergence.
 
Conclusion: The results of this study are in order to strengthen decision-making power and create conditions that provide the necessary basis for proper use of resources and factors affecting regional convergence as one of the main priorities and goals of development programs. In Iran, the effective role of oil in regional convergence depends on strengthening communication channels between regions and institutional reforms and creating efficient institutions that Guaranteed transparency and accountability and prevent centralization and rent distribution of benefits from resources between individuals, organizations and regions.

Keywords

References

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History

  • Receive Date: 21 May 2020
  • Revise Date: 13 September 2020
  • Accept Date: 26 December 2020

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