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.