A Study on the Occurrence of the Dutch Disease in Iranian Economy and Its Impact on Economic Growth

Abstract

The issue of the impact of oil revenues on the economic performance of the countries that own these incomes is a significant part of the economic literature. One of the main reasons for the poor performance of resource-rich countries is the incidence of “Dutch Disease” in these countries. Considering this issue, after we review the literature on Dutch Disease, we first focus on the occurrence of Dutch Disease in Iranian economy and in the next stage, we study the effects of this problem on economic growth. To see if the problem of Dutch Disease has happened in Iranian economy or not, we have studied the production share of different tradable sectors (industry and agriculture) and non-tradable sectors (services and housing) and to study the effects of Dutch Disease on economic growth, we have used the growth models related to this research area and we have estimated these models by applying Ordinary Least Squares (OLS) method with Withe correction. The results of our study show that the Dutch Disease has happened in Iranian economy along with the increase in oil incomes, especially in 1970s and 2000s, and also the occurrence of Dutch Disease has had a negative effect on economic growth in Iranian economy.

Keywords

• dutch disease
• economic growth
• resource curse
• oil income