The Impact of Industrial Development on Poverty Reduction in the Provinces of Iran

Regarding the importance of poverty as one of the important issues in the development economics literature, the present study addresses the factors affecting poverty by emphasizing the role of industrial development in the provinces of Iran, during the period from 2004 to 2015. The application of spatial models is desirable in regional science research based on regional sample data that has a spatial component. Therefore, in this research, spatial panel econometric models are used for model estimation. Foster, Greer and Thorbecke Index for poverty and the variables of industry's per capita value added, the depth of industrial activities (the ratio of industrial employment to the number of industrial workshops), the concentration index, and the relative regional advantage as indicators of industrial development, have been used along with the indicators of inequality and inflation in the research model. In the first scenario, the concentration index was used and in the second scenario, the relative regional advantage index was used. Findings of two research scenarios with spatial panel model indicate the positive effect of inequality, inflation and the concentration ratio on poverty as well as the negative impact of industry per capita value added, the depth of industrial activities and relative advantage based on employment on poverty. However, the regional relative advantage variables were not significant on the basis of added value, and industrial exports and human development index were not significant in the model. The results of spatial overflow effects indicate that poverty in the provinces is influenced by independent variables in neighboring provinces. It is suggested that industry sector policies be taken into account in order to increase the share of industry in domestic production.