Iran's Third Development Plan: A reappraisal

Iran, growth, Development Plan

Revolution and redistribution in Iran: poverty and inequality 25 years later

Despite nearly three decades of revolutionary government rule in Iran poverty and inequality remain the central issues of political debate in Iran. Public dissatisfaction, as demonstrated by the electoral success of the populist candidate in the 2005 presidential election, has been widely attributed to rising poverty and inequity. In this paper I use household survey data to describe the trends in poverty and inequality for the last three decades. The evidence shows that poverty, having substantially declined in recent years, is quite low by international standards and in comparison to pre-revolution years. Inequality improved significantly immediately after the Revolution but has remained relatively stable during the last 15 years. Significantly, poverty sharply declined and inequality decreased somewhat in the five years leading up to the election. Increased welfare of the poor over the period is also evident in access to basic services, such as electricity and safe water, as well as in ownership of household appliances. The wide gap between the evidence presented here, which shows improvement in the welfare of the poor, and popular sentiments in Iran, which indicate worsening poverty and inequality, raises important questions about the political economy of redistribution in Iran. I suggest that in the context of a distributive economy such as Iran's, in which wealth accumulation is seen to depend more on political access than individual productivity, more subjective feelings of envy and fairness may matter more than objective indicators of poverty and inequality.Iran, Poverty, Inequality, Redistribution

How sanctions and the pandemic affect Iran's economy

Iran has been under international sanctions of one kind or another for four decades, but its economy has never been as bad as it is now. In May 2018, the Trump administration began its campaign of maximum pressure to force Iran to renegotiate the Iran nuclear deal. This deal, officially known as the Joint Comprehensive Program of Action (JCPOA), was signed on July 2015 but only eased the sanctions for two years. During those two years, the economy rebounded but then fell into recession. Economic growth turned from 13 percent in 2016 to minus 7.6 percent in 2019. And now, since February 2020, the country has been hit by the Covid19 pandemic. The two shocks together have put unprecedented pressure on the lives of ordinary Iranians

Human Development in the Middle East and North Africa

Middle East and North African countries (MENA) have achieved much to be proud of in human development. Falling child mortality and fertility have transformed family structures in most MENA countries. Despite important advances in health, education, and income, there are certain aspects human development in which MENA countries have not progressed as far. There are inequalities in human development regionally, within each country and for specific demographic groups, most importantly for youth and women. In this paper I review the record of human development in the MENA region to highlight areas in which the region has been more successful, as well those in which human development has lagged in absolute terms or relative to economic growth. I draw attention to certain important characteristics of the region that distinguish it from other developing regions, in particular the presence of oil income and delayed demographic transition.Human development, Middle East and North Africa, Youth.

Demographic Swings and Early Childhood Education in Iran

In recent years Iran has greatly expanded its early childhood education program, taking first place in the Middle East in preschool enrolment. In this paper we examine the reasons for the unusual expansion and argue that it is in large part an institutional response to demographic changes in Iran, notably the sharp fertility decline of the 1990s. Fertility declined from more than 6 births per woman in the 1980s to about 2 in 2004, while during the same period kindergarten enrollments increased from less than 10 percent of 5 year old children to nearly one half of the population. Economists usually think of the effect of the reduction in fertility on child schooling in terms of a trade-off between quantity and quality. In their models both fertility decline and rising investment in child education are attributed to choices made by families to substitute quality for quantity of children. In the case of Iran, expansion of pre-school education appears to have an institutional explanation. In the early 1990s, following the decline in primary school enrolments in early 1990s, itself caused by fertility decline a few years earlier, caused a surplus of primary school teachers. In an attempt to preserve primary school teachers’ jobs, public schools worked together with parents to set up kindergarten classes in public schools, even though pre-primary education was not part of their official mandate.Iran demographic swings; childhood education

Labor market flexibility and investment in human capital

We consider the effect of labor market rigidities on human capital accumulation and economic growth when some human capital is difficult to observe prior to employment. We distinguish between two types of human capital, those that formal schooling and test scores can measure (``knowledge") and those that can be observed by employers only after a period of employment (``creativity"). We build a simple model to show when employers have limited discretion to set wages or terminate employment they favor the more reliable signals of ``knowledge'', such as years of schooling and class rank, at the expense ``creativity'', which stands for non-testable skills. Individuals in rigid labor markets will therefore favor greater acquisition of knowledge at the expense of creativity, which results in distorted accumulation of human capital and lower growth. We explore the implications of our model for the relevant debates in the empirical growth literature, returns to education literature, and education policy. Our model suggests a possible reason why the social return to education appears low in cross country regressions. These regressions treat years of schooling in countries with more and less flexible labor markets as the same. We show that distinguishing empirically between countries with rigid and flexible labor markets can help reveal the greater productivity of schooling in the latter. Schooling in the latter is correlated with greater investment in non-observable skills.Labor Market flexibility, investment in human capital, schooling, cognitive and non-cognitive skills, cross country regressions

Implications of Sustained Low Oil Prices on Iran

In light of pending negotiations between Iran and the P5+1 we thought you would be interested in the latest issue brief from the Center on Global Energy Policy on the relative impact of low oil prices compared to sanctions on Iran's economy. In it, co-authors Richard Nephew, the Center's Program Director for Economic Statecraft, Sanctions and Energy Markets, and Djavad Salehi-Isfahani, a Nonresident Senior Fellow at the Brookings Institution and a Professor of Economics at Virginia Tech, find that sanctions relief is essential to Iranian economic recovery, even more so than a rebound in the price of oil

Government subsidies and demand for petroleum products in Iran

Oil-exporting countries are among the world’s fastest growing consumers of petroleum products. Between 1966 and 1986, encouraged by rising incomes and falling prices, domestic consumption of oil in OPEC countries increased by 94 per cent per year. Without further increase in capacity, at this rate their consumption of refined products – which in 1993 stood at 15 per cent of oil production capacity – could exceed 50 per cent in fifteen years, thus displacing the rest of the world as the main consumer of OPEC oil. In some countries – for example, Iran, Indonesia and Nigeria – domestic consumption has already reached one-third of production, and unless checked it may outgrow planned expansion in capacity. Serious difficulties in financing the building of new capacity have prompted many countries to try to restrain domestic consumption in order to free more crude oil for exports. Increased awareness of environmental costs arising from inefficient use of oil products has also strengthened conservationist policies in oil-exporting countries