Difficulties of Public Sector Structure as Main Obstacle for Economic Progress in Iran

24 Pages Posted: 26 Mar 2018

See all articles by Yadollah Dadgar

Yadollah Dadgar

Shahid Beheshti University

Rohollah Nazari

Ferdowsi University of Mashhad (FUM)

Date Written: January 30, 2018


Iran is a big and rich country, and it is located in a strategic, geopolitical and sensitive region, that is Middle East. Due to some obvious reasons, Iran could be enumerated as a less developed country. A key dilemma in Iranian underdevelopment is the huge gap between its economic and social potentialities at one hand, and its actual performance at the other. The main factor behind the gap in question is, we think, is the current structure of Iranian public sector at one hand, and the bad governance of its public administration at the other. Iran obtains about 16% of worldly proven gas resources and 14% of world proven oil resources. The share of Iranian economy from global GDP is, however, less than 1%. Iran does have a remarkable share of human capital and its economy is capable to have 8% annual economic growth. Its average GDP and annual growth has, however, been less than 3% during 4 previous decades. Touristic attractiveness, high adjustability of its people with respect to changing circumstances, strategic geopolitical position, and so on, can be accounted as other Iranian opportunities for economic development. There is, however, a vast gap between the actual performance of Iranian economy and its potentialities. Very low productivity, vulnerability of about 37% of population, high Gini coefficient, reliance of public sector expenditures on oil revenue and thus suffering from a rentier state can be mentioned as some typical difficulties in this country. One can add to the above list, ineffective government in combating with corruption, less developed private sector, inefficient taxing system, and relatively closed economy. Elements in question can partly justify and explain the roots of some key causes of underdevelopment in Iran. Non-accountability of the main political powers, very low social capital, and some similar factors work behind current Iranian public sector as well. By relying on data of Iranian central bank, parliament research center, World Bank and OECD data sources for 1980-2017 period, and by maintaining on theories of public sector economics this research is investigating some kind of missing chain for economic progress in Iran. Moreover, it is comparing Iranian public sector with standard public sector structure at one hand and actual performance of public sector of some selected countries at the other. Key finding of this research is that deficiency of current structure of Iranian public sector and its actual performance are bottlenecks for economic development. According to results of this work, doing any influential effort to exit from such bottlenecks, requires improving public administration and operating some change regarding Iranian public sector structure. Reforming the constitutional law, benefiting from post “joint comprehensive plan of action, JCPA,” and obeying international rules of the games could be mentioned as typical spade works in this connection.

Keywords: Public Sector Structure, Iranian Economy, Residual factors for Economic Progress

Suggested Citation

Dadgar, Yadollah and Nazari, Rohollah, Difficulties of Public Sector Structure as Main Obstacle for Economic Progress in Iran (January 30, 2018). OIDA International Journal of Sustainable Development, Vol. 11, No. 01, pp. 41-64, 2018. Available at SSRN: https://ssrn.com/abstract=3147821

Yadollah Dadgar (Contact Author)

Shahid Beheshti University ( email )

Tehran, Tehran 19839

Rohollah Nazari

Ferdowsi University of Mashhad (FUM) ( email )

P.O. Box 91775-1163

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