The Effects of the Components of Public Expenditure on the Industrial Value - Added and Investment in Iran

The goal of this paper is to test the effects of different of government expenditure on industiral sector during (1972-1999). In order to consider the concise effects of fiscal policies, the effect of different components of public expenditure and incomes on industrial value added and investment has been considered. To do this, the government total expenditure has been replaced by expenditures on economics, social, public and defence sectors, and it, has been shown that the kind, combination, and the way it is financed is more important than the total government expenditure.Although the total government expenditure has no significant effect, but we cannot reject the positive effect of government expenditure on social affairs and negative effect of government expenditure on social affair. Also government expenditure on economic affairs can significantly improve the value added in industrial sector.With reference to the result of the model we can conclude that the expenditures- given the tax structure in the period of study - which is financed through taxes, did not have any significant effect on the performances of industrial sector.