The Effect of Government Size and the Severity of Sanctions on the Growth of the Value-Added of the Industry and Mining Sector in Iran's Economy: Markov Switching Approach

Considering the significant role of the government in Iran's economy, this study aims to investigate the impact of government size on the growth of the value-added of the industry and mining sectors, as well as to examine how sanctions have affected these vital sectors. To achieve these objectives, the present research has modeled the growth of Iran's industrial and mining sectors' value-added from 1980 to 2019, using the Markov switching method. The research model's estimation results indicate that government size has a negative effect on both sectors' value-added growth. Furthermore, the findings reveal that sanctions severity has a negative impact on these two sectors' value-added growth. Therefore, according to the results, real privatization and decreasing government size in the Iranian economy as well as the efforts for lifting sanctions to achieve boosting economic growth in the industry and mining sectors have been suggested.