The Assessment of the Effect of Determinants of Private Investment in Iran: an Empirical Analysis (1971-2008)

This article examines the relationship between the private and public sector performance in Iran. In particular we try to determine the roles of both government expenditures as well as revenues in private sector investment in Iran. To do so, we have used a regression model and estimated its parameters based on data for proposed variables during 1971-2008. The results show that as result of a decrease in government capital expenditures the level of private investment increases whereas the impact of GDP on private investment is positive and significance. One of the reasons for the finding impact of government investment on private investment may be due to the privatization processes initiated by implementing the article 44 of the countryʹs constitution. Therefore, it is suggested that government reduces its role for the benefit of higher share for private sector during the countryʹs 5th five year economic plan as well in 20 year economic outlook plan in order to achieve the desired goals foreseen in year 2025. Classification: JELʹ E22ʹ R24