Determinants of the Inclusiveness and Sustainability of Industrial Development in Iran: Co-integration Approach and Vector Error Correction Model

According to empirical studies, the imbalanced and even contradictory changes have happened during the industrialization process at some industrial areas and structures, and both national and provincial levels in Iran. This paper analyzes the trend of inclusive and sustainable industrial development and its determinants during the period 1974-2015 by Johansen-Juselius co-integration method. The findings show that industrial growth has experienced a highly fluctuating trend. Inclusive industrial development has experienced a relatively stable trend. However, sustainability of industrial development has recorded a downward trend during the period under study. The results of co-integration analysis indicate positive and significant effects of capital, exchange rate, technology, and research and development expenditure on industrial growth. The inclusiveness of industrial development despite is positively influenced by industrial employment, investment and social capital. Nevertheless, it is negatively affected by technology and research and development expenditure. Sustainability of industrial development is also a positive function of industrial employment, social capital and government investment on the environment sector. According to the findings, it is suggested that the more credits should be allocated for protecting environment. In addition, in order to enhance social capital, it is recommended that the participation rate of various social classes should be increased.