Document Type : Article from the Ph.D. thesis

Authors

1 P.h.D. Student of Economics, Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

2 Professor of Economics, Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran (Corresponding Author).

3 Assistant Professor of Economics, Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

Abstract

Achieving and accelerating economic growth and development have been always one of the main goals and priorities of the economic planners in different countries throughout the world. The experiences of countries in this trajectory elucidated the importance of some factors affecting economic growth more than ever, and this point led to the development of the new theories of growth. One of the newest theories developed in this regard is the institutional growth theory. The institutional economists have considered the institutes and structures that are based on the institutional economy as the fundamental factors involved in growth through developing new economic growth theories. Accordingly, many studies have evaluated the relationship between this category of factors and economic growth while analyzing the institutes and relevant structures. Meanwhile, risk management as a motivational structure that is based on the institutional economy is of great importance and special status. Since the decisions and activities of the households as an important social institute can have important effects on different economic dimensions, the risk management in this section is one of the subjects that can be addressed in the studies on the economic growth. On the other hand, because of the high level of vulnerability of the households in developing countries, selecting them to analyze and examine the effect of household risk management on economic growth can lead to a profound understanding and cohesive analysis of risk management. The present study offers a composite index to measure household risk management and analyze its change process in Iran. Furthermore, by employing the dynamic panel data method in the 2005-2017 period, it endeavors to investigate the effect of household risk management on the economic growth of a selected number of the member states of the Organization of Islamic Cooperation. it tries to provide a proper index to assess the household risk management in the countries under study by following the framework provided by Foa (2014) concerning the construction of the household preparedness against the risk. For this purpose, we consider four main sections, including the household access to the financial resources, social protection, human capital, and state capacity. The results obtained from the assessment of the household risk management index averagely assign the highest score to Malaysia and the lowest score to Pakistan. Meanwhile, Iran is ranked the 7th in this regard. The effects of household risk management, self-employment, inflation, and population growth rate on the economic growth rate were evaluated after the formulation of this index for the selected countries via the dynamic panel data method. The results obtained from model estimation indicate the positive effect of household risk management, self-employment, gross capital formation, and labor productivity on economic growth. Furthermore, the negative effects of the population growth rate and inflation on economic growth are the other results obtained from the study. In fact, considering the results, it could be said that the increase in the household access to the credits through increasing investment in education and health and as a result increase in productivity; improvement in the social protections in the form of labor freedom through increasing the consistency of the supply of and demand for the labor force and as a result increasing productivity are the consequences of household risk management. Similarly, the enhancement of the human capital through increasing the production power, and, finally, improving the state capacity by improving the livelihood of the households and as a result households’ welfare are also the positive results of the household risk management that lead to the increase in the economic growth. Meanwhile, countering unemployment, increase in competition, increase in the innovative activities, and boom in entrepreneurship can be also considered as some of the positive results of self-employment that help economic growth. It should be taken into consideration that the increase in inflation, along with the decrease in the purchasing power, consumption level, labor force supply, and investment can lead to a decrease in economic growth alongside the negative effect of the inflation on economic growth. The resource limitation, insufficient infrastructures, and the weakness of the facilities and services can also lead to the negative effect of population growth rate on economic growth.

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