Iranian Economic Review
Volume:25 Issue: 63, Spring 2021

The Discount rate is one of the important variables in the inter-temporal analysis which makes it possible to compare the current and the future values and enables economic agents and policymakers to make better decisions. In this context, the discount rate is a vital variable for the accurate evaluation of economic projects. Considering the different approaches that governmental and private sectors use to implement the investment projects, for evaluation of the governmental and public projects, a separate discount rate is used called social discount rate (SDR). In this article by using the structural equation modeling, we have estimated the SDR trend in the Iranian economy during the period 1996- 2016. To do that by extracting influencing & consequence factors of SDR (as a latent variable), we applied a Multiple Indicators and Multiple Causes (MIMIC) model. The SDR trend, as the main finding of this paper, seems to be robust enough due to its explanatory power for fluctuations of the Iranian economy in reality. The results imply that the SDR has had a mild decreasing trend in Iran's economy during the sample period and among influencing variables, the inflation rate has had the most impact on its trend. Accordingly, when the level of prices rocketed during the periods 2012-14, the SDR trend experienced a more than 60% increasing jump. However, the GDP has been the variable that mostly affected by the SDR fluctuations. It seems that controlling inflation and consequently social inflationary expectation can be proposed as a proper policy recommendation to manage SDR and its distorting impacts in Iran.

This study aims to explore welfare economic models that are viewed from the perspective of income inequality that still occurs in many countries today. Based on the theory of economic welfare, in this study, income inequality is influenced by the gap in the allocation/ownership of human and capital resources (L, K), especially in the difference of education level, labor skills mismatch and capital allocation gap. Income inequality and resource allocation gaps are measured by a specific index based on the gap formula. Based on panel data regression analysis with sample data in 33 Indonesian provinces (2007-2013), the estimation results show that the gap of education level, labor skills mismatch and credit allocation gap have proven to have a positive and significant effect on income inequality. This means that if the education gap, labor skills mismatch and credit allocation gap increase, then income inequality also increases. By knowing the magnitude of the inequality of resource allocation, policy-makers can reduce problems through reallocation and redistribution policies.

This paper examines the symmetric and asymmetric effects of oil prices on military expenditure of selected the Middle East and North Africa (MENA) oil-exporting countries. Using Linear Autoregressive Distributed Lag (ARDL) and Nonlinear Autoregressive Distributed Lag (NARDL) frameworks on annual data covers from 1960 to 2014, this paper documents that oil prices and the military expenditure shares a stable long-run relationship in all cases except Algeria. The ARDL empirical findings reveal that oil price has a positive and significant effect on military spending in all cases except Tunisia. The NARDL results further reveal the existence of asymmetric pieces of evidence that the increase in oil prices increases military spending while the decrease in oil prices reduces the military spending in the long-run for Saudi Arabia, Iran, Algeria, Kuwait, and Oman. In the short run, the results demonstrate the existence of asymmetry effect of oil price on military spending only for Iran.

The main objective of this paper is to investigate the nature of quota violation behavior in OPEC members. We examined herding behavior (co-movement) and quota violation in a non-linear panel data model for 9 selected OPEC members. In terms of heterogeneity in OPEC member states, the level of dependence on oil revenues (threshold variable) as a country-specific characteristic has been involved in our model. Results showed that there was a positive and significant relationship between the violation of the allocated quota in a country and other members. In other words, there is a co-movement between the violations of the quota among OPEC members. Also, in countries which the level of dependence on oil export revenues is higher than the threshold (54%), the violation of allocated quotas is 1.5 times higher than countries with less dependency on oil export revenues. Increasing the dependence on oil revenues (Mainly due to budget constraints) incentivizes the OPEC members to be violated from established quota and consequently, reduces the efficiency of the quota system.

This paper aims to examine the effects of the circumstances beyond the control of individuals on wage inequality using the Household Labor Force Survey in the period 2004-2016 in Turkey. The parametric and non-parametric inequality of opportunity estimation methods has been employed for male and female wage/salary earners separately. Parametric estimation results demonstrate that the proportion of inequality of opportunity in total wage inequality increases from 2004 to 2008 and declines afterward. Using the education level of the household head as a sole indicator of circumstances, non-parametric estimation shows that inequality of opportunity increases in the corresponding period. The percentage varies between 18.5%-24.7% and 8.8%-16.7% for females and males, respectively. The education level of the household head and the region are the most significant contributors to the inequality of opportunity in all years.

If people feel that the decisions made by health authorities are the result of the public’s points of view, they will accept them without any question. This is a descriptive‐analytic cross‐sectional study in which we used the DCE (Discrete choice experiment) technique to elicit the public’s preferences for individuals with different education levels in Tehran in 2017. The study findings indicated that for individuals with a bachelor’s degree, treatment of patients suffering from communicable diseases is the top priority (odds ratio = 2.79), while for those with a master’s and doctoral degree, the most important criteria for prioritizing resources were severity of disease (odds ratio = 2.66) and benefit from treatment (odds ratio = 2.38), respectively. The study results will help healthcare policy and decision-makers to better understand and analyze the causes of differences in society members' behaviors.

One of the significant issues studied in the oil-exporting countries has been to identify the relationship between oil and economic growth, and the nature of the relationship has been important for the economic policymakers of these countries. This study aims to investigate the effect of oil revenues on Iran’s economic growth over the period 1971-2017. For this purpose, the threshold effects of oil revenues on economic growth regimes are modeled using a hybrid threshold Markov switching model. The results from the model estimation indicate that oil revenue has a nonlinear and threshold effect on Iran’s economic growth regimes in which as long as oil revenues have a share less than 16.3% in GDP, oil revenues have a positive effect on growth but after exceeding this threshold, oil rents had a negative and significant effect on economic growth. The results also imply that Iran’s economic growth has two regimes, namely the high-growth regime and the low-growth regime, in which the fluctuations in the high-growth regime are more than that in the low-growth regime.

This study examines the tendency of low-income economies in ECOWAS to converge with their high-income neighbors. It extends the frontier of knowledge by ascertaining how quickly financial development (FD) and foreign direct investment (FDI) would stimulate growth, causing low-income ECOWAS member states to catch up. Also, the required threshold for FD and FDI required to facilitate convergence were computed. To achieve the above, fifteen ECOWAS member states were examined within the period 1990 to 2017 using panel data obtained from the World Development Indicators (WDI) 2018 database. The Fully Modified Ordinary Least Square (FMOLS) technique of analysis was utilized and the study found an absence of conditional convergence among ECOWAS member countries. More so, the FD-FDI threshold level required to aid conditional convergence is 22.8% and 3.77% respectively. Therefore to ensure convergence, the study recommends that low-income member states must thrive to attract FDI and seamless credit to the private sector.

Increasing international interdependence leads to a higher degree of inflation vulnerability to foreign and global shocks. In this regard, inflation management is one of the most important challenges various countries are facing in the global economy. The present paper aimed to examine the regional and global origins of inflation in Iran. A GVAR model featuring a dominant unit was estimated for 34 countries during 1988Q4-2016Q4. The findings indicated that Iran’s inflation is directly and positively affected by oil and food price shocks in both the short and long-run. Furthermore, there are relatively strong spillover effects, and hence inflationary pressures are exacerbated due to the higher inflation rates of Iran’s trading partners. Almost 21 percent of Iran’s inflation changes are explained by foreign shocks. About 8 percent are attributed to the inflation of Iran’s trading partners that one-third of this contribution is related to China and India, and one-fourth to Latin America and Turkey. The findings reveal that Iran’s economy has a high degree of vulnerability to regional and global shocks.

Since the debt crisis in the 1980s, the effect of external debt on economic growth has been a controversial issue for economists. This paper aims to investigate the effects of external debt on economic growth in Iran and Malaysia. Findings of a Smooth Transition Regression (STR) model support a nonlinear relationship between the external debt size (the ratio of external debt stocks to GDP) and economic growth in Iran and Malaysia over the period 1973–2017. Moreover, results of the STR models estimation show that external debt affects Iranian economic growth in a two-regime structure with a threshold of 2.96%, so that, the effect is negative in both regimes, but in the second regime as debt increases, the negative effect becomes larger. Also, findings indicate that external debt size harms Malaysian economic growth in a three-regime structure with two thresholds of 24.41% and 55.76%. Finally, the mentioned negative effect is considerably less severe in Malaysia than in Iran.

In this study, the cointegration relationship between the financial, industrial, services and technology indices in Borsa Istanbul is analyzed by employing the Johansen cointegration test and Hatemi-J and Irandoust (2012) hidden cointegration test. Daily data cover the period January 02, 2012, to September 24, 2018. While the Johansen cointegration test indicates no cointegration, the Hatemi-J and Irandoust test showed that there is a hidden cointegration among the four indices. Accordingly, an increase or decrease in the index prices will be effective in the formation of other index prices. Thus, it is not possible to diversify within the Turkish stock market.

This study analyzes to describe and develop investments for small, medium, and large entrepreneurs and policymakers. There are 50 respondents (including experts in Investment Agency and Central Bureau of Statistics in Malang City, heads of sub-districts in Malang City, and businessmen in small, medium, and large-sized enterprises in Malang City). The research finding shows that the values of ICOR Lag 1 to Lag 3 are efficient. Therefore, the investment should be done in a long-term period. The potential areas for investment are located in three sub-districts in Malang City.