The effect of structural changes on regional economic growth: spatial panel approach

HOSSEINZADEH, RAMEZAN; Dadras Moghadam, Amir; Gharanjik, Masumeh

doi:10.22055/jqe.2020.31664.2175

Document Type : Research Paper

Authors

¹ Assistant Professor of Economics, Faculty of Economics and management, University of Sistan and Baluchestan, Zahedan, Iran.

² Assistant Professor of Agricultural Economics, Faculty of Economics and management, University of Sistan and Baluchestan, Zahedan, Iran.

³ Ph.D. student of Economics, Faculty of Economics and management, University of Sistan and Baluchestan, Zahedan, Iran.

https://doi.org/10.22055/jqe.2020.31664.2175

Abstract

INTRODUCTION
One of the factors affecting economic growth along with traditional factors of production such as labor force and capital is structural changes in the economy. Structural change is a broad economic process that involves changes in the structure of production and employment within and across sectors of the economy. The emergence of new activities and sectors in the economy and the disappearance of old activities and sectors are also indicators of structural changes in the economy (Gabardo et al., 2017, p. 5). From the perspective of a well-structured economy the countries and regions that have a production structure commensurate with regional and national potentials can experience faster economic growth, and countries that depart from this well-structured position, will have a less economic growth (Eigner, 2001, p. 3). Therefore, investigating the effect of structural changes on macroeconomic variables and then identifying the factors influencing structural changes can provide a good basis for policymakers to remove the barriers of structural change and thereby achieve greater growth and development in the regions and also in the country. Economic growth and development in an area can be influenced both by specific characteristics within the region (direct and intra-regional effects) and by the characteristics of the surrounding area (spillovers and inter-regional effects) (Sharify and Hosseinzadeh, 2016, p. 2). Disregarding the interconnections and spillover effects between the variables can cause the model results to be biased. One of the models that is able to consider inter-regional correlations and consider the spillover and indirect effects of variables is the spatial econometric model.
METHODOLOGY
The main purpose of this study is to investigate the direct and spillover effects of structural changes on economic growth in 28 provinces of Iran during 2004-2015 using spatial econometric model. An important feature of this study compared to previous studies in the field of structural change impact is the use of spatial econometric model to study the direct and spillover effects of this variable on economic growth in different provinces of the country. The production data of different economic sectors were used as the statistical bases for calculating the structural change and Gross domestic production index in 28 provinces of the country. Also, government expenditure and provincial active population variables were used as control variables. Finally, the Spatial Durbin Model (SDM) and the Stata 14 software were used to estimate the model.
FINDINGS
The results of the model estimation showed that structural changes directly and indirectly had a significant and negative impact on the production of regions. This indicates that structural changes have not been consistent with the regional growth pattern. Also, government spending variables in the region and the active population of the region had a positive and significant direct effect on regional economic growth.
CONCLUSION
Based on the results of the research, it can be concluded that the economic structure in different provinces of the country should be changed in accordance with the regional advantages. Government spending should also increase in line with regional potential.

Keywords

References

Aboonori, E., Farahati, M. (2016). The structure of production and distribution of income. Journal of Economic Modeling, 9 (32), 1-23.## Ahangari, A., and Khorramzadeh, A. (2012). Investigating the Effect of Changes in Economic Structure on Iran's GDP: with Emphasis on Labor Production, Exports and Productivity. Quarterly Journal of Quantitative Economics, 9(1), 67-85. (in Persian). ##Ahmadi, M., falahati, A., & Delangizan, S. (2020). Dynamic study of regional inequality transfer in Iran (Case study: Iranian provinces). Quarterly Journal of Quantitative Economics, 17(1), 85-119. (in Persian). ##Aiginger, K. (2001). Speed of change and growth of manufacturing. M. Peneder et al., Structural Change and Economic Growth, WIFO, Vienna.‏. ##Beheshti, M. B., Mohammadzadeh, Q., Parviz, K. (2017). Structural Changes and Income Inequality in the Provinces of Iran. Regional Planning Quarterly, 8(30), 1-14. (in Persian). ##Chenery, H. B., Srinivasan, T. N., Schultz, T. P., Behrman, J. R., Strauss, J., Rodrik, D., & Rosenzweig, M. R. (Eds.). (1988). Handbook of development economics (Vol. 4). Elsevier.‏ ##Chenery, H. B., & Taylor, L. (1968). Development patterns: among countries and over time. The Review of Economics and Statistics, 391-416.‏ ##Cortuk, O., & Singh, N. (2011). Structural change and growth in India. Economics Letters, 110(3), 178-181.‏ ##Diao, X., Rattsø, J., & Stokke, H. E. (2006). Learning by exporting and structural change: A Ramsey growth model of Thailand. Journal of Policy Modeling, 28(3), 293-306.‏

Diao, X., Kweka, J., & McMillan, M. (2018). Small firms, structural change and labor productivity growth in Africa: Evidence from Tanzania. World Development, 105(3), 400-415.‏ ##Elhorst P.)2010(. Spatial Panel Data Models. Handbook of applied spatial analysis. Edited by Fisher, M.M, Getis, and A. Netherlands: Elsevier Science Publishers B.V. ##Elhorst, J. P. (2014). Spatial panel data models. In Spatial econometrics (pp. 37-93). Springer, Berlin, Heidelberg.‏ ##Fagerberg, J., & Verspagen, B. (1999). Modern Capitalism in the 1970s and 1980s. In Growth, employment and inflation (pp. 113-126). Palgrave Macmillan, London.‏ ##Gabardo, F. A., Pereima, J. B., & Einloft, P. (2017). The incorporation of structural change into growth theory: A historical appraisal. EconomiA, 18(3), 392-410.‏ ##Herrendorf, B., Rogerson, R., & Valentinyi, k. (2014). Growth and structural transformation. In: Aghion, P., Durlauf, S. (Eds.), Handbook of Economic Growth, 1st ed. North Holland, Amsterdam, New York, pp. 855–941 (Chapter 6). ##Kongsamut, P., Rebelo, S., & Xie, D. (2001). Beyond balanced growth. The Review of Economic Studies, 68(4), 869-882.‏ ##Kuznets, S. (1993). New Economic Growth. Translated by Gharabaghian, Tehran: Rasa Cultural Services Institute (in Persian). ##Lesage, J., (2009). Space Economics Theory and Techniques in Software .MATLAB Translation: Seyed Abdolmajid Jalaei et al. Tehran: Noor Alam Publications (in Persian). ##LeSage, J. P., & Pace, R. K. (2014). The biggest myth in spatial econometrics. Econometrics, 2(4), 217-249.‏ ##Maddison, A. (1987). Growth and slowdown in advanced capitalist economies: techniques of quantitative assessment. Journal of economic literature, 25(2), 649-698.‏ ##Moshiri, S., Altaji, E. (2009). The Effect of Structural changes on the Economic Growth of Newly Industrialized Countries. Iranian Economic Research Quarterly, 12(36), 85-113. (in Persian). ##Nishi, H. (2016). Structural change and transformation of growth regime in the Japanese economy. Evolutionary and Institutional Economics Review, 13(1), 183-215.‏ ##Peneder, M. (2003). Industrial Structure and Aggregate Growth. Structural Change and Economic Dynamic, 14(3), 427-448. ##Qarnjik, M., and Esfandiari, M. (2018). The Role of Structural Change in Stimulating Economic Growth in OPEC member countries. Applied Economics, 8(1), 60-74. (in Persian). ##Sharifi, N., and Hosseinzadeh, R. (2016). The Effect of Exports between Regions on the Growth of Regional Production: a Case Study of Golestan Province and other Regions using Two-region Data-output Analysis. Journal of Economic Modeling Research, 24(2), 123-146. (in Persian). ##Shahbazi, K., Rezaei, E., and Hamidi Rozi, D. (2014). Study of Economic Convergence of Member Countries of ECO Economic Cooperation Organization: panel Spatial Economics Approach. Quarterly Journal of Business Research, 74(4), 155-196. (in Persian). ##Syrquin, M. (2012). Two approaches to the study of structural change and economic development: Kuznets and Pasinetti. Structural Dynamics and Economic Growth, 1(2), 69-87.‏ ##Szirmai, A. (2009). Industrialization as an engine of growth in developing countries. Georgia Institute of Technology.‏ ##Vu, K. (2017). Structural Change and Economic Growth: Empirical Evidence and Policy Insights from Asian Economies. Structural Change and Economic Dynamics, 41(3), 64-77. ##Wang, C., Zhang, X., Ghadimi, P., Liu, Q., Lim, M. K., & Stanley, H. E. (2019). The impact of regional financial development on economic growth in Beijing–Tianjin–Hebei region: A spatial econometric analysis. Physica A: Statistical Mechanics and its Applications, 521(3), 635-648.‏ ##

The effect of structural changes on regional economic growth: spatial panel approach

References

References

Volume 18, Issue 1 - Serial Number 68(2021). 18 (1)June 2021Pages 51-62

Volume 18, Issue 1 - Serial Number 68
(2021). 18 (1)
June 2021
Pages 51-62