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Regional dimensions of economic development in Iran: A new economic geography approach

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  • Farmanesh, Amir

Abstract

This paper presents a spatial analysis on regional dimensions of poverty and economic development across provinces of Iran. It offers the first ever estimation made in developing countries using this strand of "New Economic Geography" (NEG) models and provides a comparison of the results between previously studied developed countries and Iran as a developing country. The goal of this study is to offer an analysis of the effects of agglomeration and dispersion economies on the patterns of regional economic development in Iran. It analyzes the linkages among adjacent provinces as well as effects of agglomeration and dispersion economies on the patterns of Iran's regional economic development through empirical estimation of two of the NEG models. First, it presents an estimation of a "Market Potential Function" (MPF), in which wages are associated with proximity to consumer markets. Second, the paper estimates an augmented MPF derived from the Krugman model of economic geography. The parameters in this model estimate the importance of transportation cost and economies of scale. The estimation results suggest that Iran showed generally good fit to both models and satisfied both MPF and Krugman model specifications. Compared to other similar studies in developed countries, Iran shows smaller returns to scale and consistently higher size of the effect of market potential on wages.

Suggested Citation

  • Farmanesh, Amir, 2009. "Regional dimensions of economic development in Iran: A new economic geography approach," MPRA Paper 13580, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:13580
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    File URL: https://mpra.ub.uni-muenchen.de/16942/2/MPRA_paper_16942.pdf
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    References listed on IDEAS

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    2. Mion, Giordano, 2004. "Spatial externalities and empirical analysis: the case of Italy," Journal of Urban Economics, Elsevier, vol. 56(1), pages 97-118, July.
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    4. Redding, Stephen & Venables, Anthony J., 2004. "Economic geography and international inequality," Journal of International Economics, Elsevier, vol. 62(1), pages 53-82, January.
    5. Michael Roos, "undated". "Wages and Market Potential in Germany," Discussion Papers in Economics 00_09, University of Dortmund, Department of Economics.
    6. Henry Overman & Stephen Redding & Anthony J. Venables, 2001. "The Economic Geography of Trade, Production, and Income: A Survey of Empirics," CEP Discussion Papers dp0508, Centre for Economic Performance, LSE.
    7. Steven Brakman & Harry Garretsen & Marc Schramm, 2004. "The Spatial Distribution of Wages: Estimating the Helpman-Hanson Model for Germany," Journal of Regional Science, Wiley Blackwell, vol. 44(3), pages 437-466.
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    9. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
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    11. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
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    Cited by:

    1. Mehmet Burak Turgut, 2014. "Regional Economic Activity in Turkey: A New Economic Geography Approach," Working Papers 2014/5, Turkish Economic Association.
    2. Ali Shakoori, 2016. "Regionalism versus centralism: an analysis of failure of regional planning in Iran," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 18(1), pages 202-220, October.

    More about this item

    Keywords

    New Economic Geography; Spatial agglomeration; Market potential; Market structure; Increasing returns to scale; Transport costs; Iranian economy; Economic development in Iran; Income distribution in the provinces of Iran; Empirical evaluation;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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