Misallocation of Resources and Economic Growth in Iran: An Input-Output Approach

The Iranian economy suffers from low economic growth despite having access to enormous reserves of natural resources. The role of investment rate as the driving force of economic growth has been the focus of much debate among macroeconomists. This raises an important question: Why does growth in Iran remain low despite of high investment? One way to answer this question is to look at the relationship between economic structures and performances. Contributing to the literature in the field, we incorporate intermediate goods in our calculation of inter sectoral resource allocation for the purposes of production analysis over the period of 1973-2011. Five national input-output tables for the years of 1973, 1986, 1991, 2001 and 2011 consisting of 19 sectors in current prices have been used in this study. The results showed that the average production multiplier is 1.8. The overall findings revealed that the structural transformation has shifted from agriculture to some industries and service sectors which differs from the experiences of developing and developed countries.