Does Market Potential Matter? Evidence on the Impact of Market Potential on Economic Growth in Iranian Provinces

The market potential is an indicator showing the level of market access and national demand for products of a region. The aim of this study is to study the effect of market potential on regional economic growth in 28 Iranian provinces over the years 2001–2011. In order to do that, a model of regional growth was estimated by using Spatial Dynamic Panel Data technique. This technique allows us to control for endogeneity biases. Based on the findings, the market potential has a significant positive impact on economic growth of Iranian provinces. This means that as the regional market of products gets bigger, it will experience a higher economic growth.