A paper on capital formation and oil in Iran
I found this paper by Sousan Badiei and Cyrus Bina in an online journal: Topics in Middle Eastern and North African Economies
The introduction (I dropped the references:()) follows. The paper is available here.
Introduction: The focus of this study is on the “rentier” character of state and economy in relation to capital accumulation during the period of 1960-1997 in Iran. The rentier character and structure of the Iranian State reflects the domination of the economy by the oil sector (). The rentier nature of the Iranian economy is also potentially recognized through a strand of literature in economic development, known as Dutch Disease (). Such domination has continually been the common denominator of both the Shah’s, as well as the Islamic Republic’s regimes in Iran. ... It is shown through a simple but decisive econometric model that oil revenues had a positive and significant relationship with the long-term trend of gross fixed domestic capital formation (GFDCF) during the latter part of Shah’s regime in Iran. However, it is also shown that such a positive and significant relationship had suddenly become negative after the legendary oil price hike of 1973-1974, despite the fact that it brought an enormous windfall to the Shah’s treasury by 1975 (). The situation under the Islamic regime has been somewhat different. Iran’s oil revenues have declined substantially, and were subject to much fluctuation during the period of 1980-1997 (). It is shown that econometrically there is no significant relationship between the extent of oil revenues and the gross fixed domestic capital formation (GFDCF) during the period of 1980-1997 in Iran. Moreover, the Islamic regime in Iran does not appear to have paid much attention to capital accumulation and long-term investment. Instead, the government seems to have allocated the revenues from oil rents to politically motivated consumption expenditures and unproductive activities, presumably, to contain and ameliorate the potential internal political upheavals and external threats during the period under study (). The analogue of these activities is the fact that the Government of the Islamic Republic has consistently engaged in the allocation of various sorts of (formal and informal) subsidies to those areas and interest groups that provided sustained ideological and material support for the fortification of the regime in Iran ().
The introduction (I dropped the references:()) follows. The paper is available here.
Introduction: The focus of this study is on the “rentier” character of state and economy in relation to capital accumulation during the period of 1960-1997 in Iran. The rentier character and structure of the Iranian State reflects the domination of the economy by the oil sector (). The rentier nature of the Iranian economy is also potentially recognized through a strand of literature in economic development, known as Dutch Disease (). Such domination has continually been the common denominator of both the Shah’s, as well as the Islamic Republic’s regimes in Iran. ... It is shown through a simple but decisive econometric model that oil revenues had a positive and significant relationship with the long-term trend of gross fixed domestic capital formation (GFDCF) during the latter part of Shah’s regime in Iran. However, it is also shown that such a positive and significant relationship had suddenly become negative after the legendary oil price hike of 1973-1974, despite the fact that it brought an enormous windfall to the Shah’s treasury by 1975 (). The situation under the Islamic regime has been somewhat different. Iran’s oil revenues have declined substantially, and were subject to much fluctuation during the period of 1980-1997 (). It is shown that econometrically there is no significant relationship between the extent of oil revenues and the gross fixed domestic capital formation (GFDCF) during the period of 1980-1997 in Iran. Moreover, the Islamic regime in Iran does not appear to have paid much attention to capital accumulation and long-term investment. Instead, the government seems to have allocated the revenues from oil rents to politically motivated consumption expenditures and unproductive activities, presumably, to contain and ameliorate the potential internal political upheavals and external threats during the period under study (). The analogue of these activities is the fact that the Government of the Islamic Republic has consistently engaged in the allocation of various sorts of (formal and informal) subsidies to those areas and interest groups that provided sustained ideological and material support for the fortification of the regime in Iran ().
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