Spatial Pattern on the Allocation of Costs and Acquisition of Capital Assets in the Iranian Provinces: A Political Economy Analysis

Provinces-related current and developmental budgets are among the most important economic tools controlled by public sector which can decrease regional inequalities and imbalances in the country. Therefore, this study investigates different aspects of this issue and the impact of different economic variables on the distribution of current and developmental budgets in the provinces. The explanatory variables used in this study consist of non-oil GDP per capita, share of oil in GDP, population density and total expenditure allocated to the provinces of the country.
In doing so, using panel data 1384-92, we estimate the empirical model through econometric tests. The model has been applied in terms of both variable and fixed effects and estimation by "Housman test". The results show that there is positive relationship between the variables of non-oil GDP per capita, population density and total expenditure. The share of oil in GDP has negative and significant effect on provincial credits. Coefficient of GDP per capita represents income elasticity of provinces-related public budget and, in fact, reflects the exchange efficiency and equity in the model. Obtained coefficient for this variable is 0.359. meaning that although the behavior of the Iranian government's budget is not based on absolute performance but is allocated to the provinces that have higher production rather than the provinces that suffer most from poverty.