Calculation of Local Fiscal Stress Index in Iranian Provinces and Determining its Spatial and Threshold Effects on Regional Growth and Employment

Due to economic shocks and imbalances in structural budgets, there is a situation that leads to stress in governments in uncertain conditions. Fiscal stress as a unstable situation in local governments' financing can exacerbate governments' inability to meet short-term and long-term fiscal commitments and excessive dependence on the central government. In this study, we tried to clarify the fiscal situation in 31 provinces of Iran by calculating the local fiscal stress index under variables of each province's fiscal structure and budget, then, we estimate the  threshold and spatial effects through the Panel Smooth Transition Regression method on economic growth and employment over the period 2005-2017. The results show that the high effectiveness of the labor market from stress to economic growth. Initially, these effects on both economic growth and employment have an immediate and positive effect. but by crossing the threshold of fiscal stress and exerting pressure on it, the ability to control this imbalance is eliminated and will reduce economic growth and employment.