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What is the Driving Force Behind Industrial Development in Iran? Rent Seeking and Labor Exploitation as the Driving force of Industrial Growth

Author

Listed:
  • Seyyed Hamid Reza Ashrafzadeh

    (Institute for Trade Studies and Research)

  • Maysam Musai

    (Associate professor of Social Planning, University of Tehran)

Abstract

This article is a contribution to the theory and empirics of rent seeking, labor exploitation and industrial profitability. We measure the interest rate rent, labor exploitation and technological progress. The profitability and accumulation in industries is derived from a simple mathematical model. The interest rate rent and labor exploitation are two important factors of industrial growth in Iran. Also, the estimated profits of industries are very high which further industrial growth. We have estimated the variables in a panel of industrial sectors and proved a positive correlation between value added in industries and interest rate rent, exploitation and profitability, such that each one percent increase in interest rate rent causes value added to increase by 1.5 percent. We have extended the results to a debate on political economy of Iran and the economic history of the country and reached some conclusions regarding the devastation of Iranian industrial base in 18 and 19 century.

Suggested Citation

  • Seyyed Hamid Reza Ashrafzadeh & Maysam Musai, 2009. "What is the Driving Force Behind Industrial Development in Iran? Rent Seeking and Labor Exploitation as the Driving force of Industrial Growth," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 14(1), pages 79-104, spring.
    • Handle: RePEc:eut:journl:v:14:y:2009:i:1:p:79
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    References listed on IDEAS

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    1. Elie Appelbaum & Eliakim Katz, 2008. "Seeking Rents by Setting Rents: The Political Economy of Rent Seeking," Springer Books, in: Roger D. Congleton & Arye L. Hillman & Kai A. Konrad (ed.), 40 Years of Research on Rent Seeking 1, pages 555-569, Springer.
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