Testing Kaldor's Engine of Growth Hypothesis in Iran's Economy

According to Kaldor, industry is an engine of economic growth. Following developed countries experiences, many developing countries have, selected industrialization strategy to boost their economic development. Iran was one of these countries that started industrialization policy in 1960s through an import substitution strategy. The objective of this paper is to test the Kaldor's Engine of Growth, KEG, in Iranian economy. We apply cointegration and Granger casualty methods to test the Kaldor’s hypothesis in Iran using the data for the period 1959-2000. The main finding of the research confirms KEG in Iranian economy.