اثر سرمايه گذاري دولت در زيرساخت حمل و نقل بر سرمايه گذاري بخش خصوصي و رشد اقتصادي در ايران

The impact of Public Investment in Transportation on Private Sector Investment and Economic Growth in Iran

Based on the published information by Iranian Bank Markazi (Central Bank of Iran), the share of investment in transportation sector increased from 11.04 to 22.27 percent over the period 1372 (1993) to 1382 (2004). It seems that Iranʹs transportation sector has been in the duration of capital accumulation. Since the development of this sector is very expense intensive, it is necessary to study how investment in transportation influences the macroeconomic variables. Hence, in this study we investigate the effects of government spending or public investment in transportation on private sector investment and economic growth in Iran. In other words, we respond to the two following questions considering the mentioned period (1993 - 2004): 1- Does public investment in transportation crowd out private sector investment? 2- Is there a positive relationship between public investment in transportation and economic growth? There are conflicting evidences in the literature regarding the question "How the public investment affects private investment?". Some of them indicate a positive relationship between public and private investment [Sundrajan & Thakur (1980), Green & Villanueva (1990), Abdoli (1374)]. The others, due to restriction of resources, present a negative relationship ( Blijer & Khan, 1984 ). In this study, regarding the accomplished researches in developing countries and Iran economic specifications, an adjusted flexible accelerator model to study the private investment function is used. In addition, according to the purpose of this study we consider private investment as a function of the following variables: - First-differential variables including: gross domestic product (regardless of oil sector), real financing facilities granted to the private sector by banks, oil export, public investment in transportation and public investment in other sectors. - Gross investment and capital stock in the previous year. It is remarkable that real financing facilities granted to the private sector by banks is considered as a proxy for the interest rate that is determined by government. Finally, private investment function is estimated based on annual data from 1994- 2003 via the instrumental variables method, after omitting two independent variables, first-differential of oil export and public investment in other sectors. There are two types of researches for studying the relationship between public investment in transportation and economic growth: First, public investment is considered as one of the inputs in the production function [Aschauer (1989), Munnel (Feb. 1990), Holtz-Eakin (1994)]. Second, the causal relationship between public investment in transportation and economic growth is investigated [Easterly& Reblo (1993), Devarajan (1996), Emranul Haqu & Dong Heon Kinm (2003), Molashahi (1382)]. In order to study the mentioned relationship we acquire Neo-Classic growth model and Khan & Rainhard (1990) approach. We develop that model by adding investment in transportation infrastructure as a component of production function. In our growth model we consider two variables, public investment in transportation sector and public investment in other sectors as inputs of production function, along with labor force and private investment variables. This model is estimated based on annual data from 1339 to 1382, by using the OLS method. This empirical study is based on data from Management and Planning Organization and Central Bank of Islamic Republic of Iran. Estimations and statistical tests indicate that there is a strong relationship between public investment in transportation and private sector investment. Positive and high elasticity of public investment in transportation shows that investment in this infrastructure has a significant positive impact on economic growth in Iran. But we should not ignore that achieving such results is due to the existence of necessary conditions for economic development such as: 1 - access to production resources 2- investment conditions related to scale, location, time, and the network affects 3- political and organizational conditions in relation to financing methods, legal policies and decisions for investment in local, regional, and national levels of transportation. Regarding discussed issues, the study of various influences made by the development of this infrastructure (transportation) on the economic variables may be used as contributing guidelines for the policy analysts. At the end, the study on different levels of location (local, regional, and national) and period (short, intermediate, and long run) or combinations of them are suggested for future research with similar topic.