The Mechanisms through which Industrial Clusters Affect Regional Economic Growth in Iran: Panel Data Approach

In this paper, the effects of industrial clusters on regional economic growth have been analyzed through an endogenous growth model using panel data approach (30 provinces during 2001-2012).The findings show a statistically significant relationship between industrial clusters and regional economic growth so that 1% increase in industrial cluster growth leads to 0.09% increase in reginal economic gowth rate. Investigating the mechanisms in which industrial clusters affect regional economic growth, reveals that the positive effects of industrial clusters on Iran regional economic growth are due to the improvement in labor and human capital. Industrial clusters, however, could not successfully enhance economic growth through technology development and finance facilitation. The findings show the necessity of serious attention to the technology and financial improvement program in the industrial cluster development policies.