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Saving structure, housing speculation, and economic growth in the Iranian economy

Author

Listed:
  • Yousef Mohammadzaheh

    (Urmia University)

  • Arash Refah-Kahriz

    (Urmia University)

Abstract

Economic theories argue that saving is a significant financial resource for investment and economic growth; however, its structure has received little scholarly attention. Saving structure could result in undesirable consequences if its structure causes instability in the economy. This study investigates the relationship among saving structure, housing speculation, and economic growth in the Iranian economy from 1970 to 2020. Findings show that saving does not contribute to economic growth in the Iranian economy but directs it to speculative activities in the land and housing market. This speculative behavior increased the housing price index far more than the total price index in this market. In such a situation, it could be challenging to start a business in Iran since land is considerably expensive. Moreover, Iranian households allocate a large proportion of their income to purchasing land and housing. This behavior causes a recession in other sectors of the Iranian economy as well. Although the Iranian economy enjoys a high level of saving and financial resources, it constantly suffers from a budget deficiency for investment since saving is flown toward speculation in the land and housing market.

Suggested Citation

  • Yousef Mohammadzaheh & Arash Refah-Kahriz, 2023. "Saving structure, housing speculation, and economic growth in the Iranian economy," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 25(1), pages 170-195, June.
    • Handle: RePEc:spr:jsecdv:v:25:y:2023:i:1:d:10.1007_s40847-022-00214-z
    DOI: 10.1007/s40847-022-00214-z
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    More about this item

    Keywords

    Saving; Economic growth; Housing; Speculation; Iranian economy;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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