The Long-Term Economic Effects of Structural Budget Reform Emphasizing the Rationalizing the Composition and Size of Government in Iran (Systemic Dynamics Approach)

The main purpose of this study is to simulate the long-term economic effects of government size on the economy and its expenditures combination based on Iranchr('39')s budget structure over the next 20 years using the dynamic system of scenarios. In the first scenario, the increase in government size and the combination of government spending in the economy show that with the increase in government size, although the private sector investment trend is increasing in the short run, its level shifts and decreases from the previous path, and in the long run the private sector investment has declined; Furthermore, since government spends most of its revenue on running costs, production does not grow much in the long run as government size increases. In the second scenario, with the increase of the governmentchr('39')s construction share of the total budget of the country, its short-term and long-term effects are systematically estimated. The results show that as the governmentchr('39')s development share of the total budget increases, although private sector investment will increase more rapidly in the short term, in the long run the amount of private sector investment affected by other economic factors are declining, although GDP and national income are also increasing in the long run. Therefore, in order to increase production in the economy of Iran, economic development policymakers must effectively and efficiently increase public participation in the economy and reduce government size, by channeling the countrychr('39')s revenues and revenue sources in the development of infrastructure, technology, and production in the short term.