Impact of Development Strategy on Economic Growth of Iran: New Structural Economics Perspective

The present paper aims to test the new structural economics hypothesis in regard to the effect of development strategy on economic growth in a country that has witnessed an eight-year war and has suffered severe sanctions i.e., Iran. According to the new structural economics, if a country adopts a comparative advantage defying strategy, it will have poor growth performance. In contrast, to have a strong economic growth, it should employ a comparative advantage following strategy. the technology choice index (TCI) is utilized as a proxy of development strategy. Based on this indicator, increasing of TCI means that a country is conducting a comparative advantage defying strategy. The relationship is estimated by the ARDL bounds test approach. To run the model, the technology choice index (TCI), and a variety of control variables were included in the model. Hence, time-series data was collected from reliable databases for the period 1979-2018. The results in which their stability is checked, reveal a negative effect of adopting a comparative advantage defying strategy on economic growth, which supports Lin's hypothesis. In other words, it is shown that by increasing TCI, economic growth is declined significantly. So, to achieve economic growth, a kind of development strategy should be adopted that is based on pursuing comparative advantages.