Javad Taherpoor; Ali Arab Mazar Yazdi; Mahshid Malekhosseini
Abstract
Financial instability poses a challenge for developing countries, particularly oil-dependent developing nations, due to their reliance on windfall oil revenues. During periods of abundant oil income, governments tend to increase spending under political pressures, while during times of declining ...
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Financial instability poses a challenge for developing countries, particularly oil-dependent developing nations, due to their reliance on windfall oil revenues. During periods of abundant oil income, governments tend to increase spending under political pressures, while during times of declining revenues, they struggle to reduce expenditures proportionally due to spending rigidities. In this context, institutional quality appears to influence fiscal sustainability by fostering fiscal discipline. Accordingly, this study examined the impact of institutional quality on fiscal sustainability in 11 oil-producing developing countries and 16 non-oil developing countries from 2010 to 2020, using panel regression models and the PCSE technique. To measure institutional quality, three indicators were used: control of corruption, rule of law, and regulatory quality, while fiscal sustainability was measured by budget deficit volatility. The estimation results indicate a negative relationship between budget deficit volatility and institutional quality indicators. Furthermore, a comparative analysis revealed that the effects of corruption control and regulatory quality are stronger in oil-producing developing countries, whereas the rule of law has a greater impact on budget deficit volatility in non-oil developing countries.
Introduction
The mismatch between the growth of government revenues and expenditures has turned fiscal instability into a serious challenge in developing countries, particularly in many oil-dependent developing nations. In these countries, governments control windfall oil revenues and, disregarding their finite and volatile nature, expand their expenditures—especially consumptive spending—to gain political support, thereby exacerbating fiscal instability. Iran, too, has faced fiscal instability due to its long-term reliance on windfall oil revenues, which the government has used to expand consumptive expenditures (through hiring, wage payments, subsidies, etc.), as well as to finance the legacy of the eight-year Iran-Iraq war. Therefore, this research aims to examine how institutional quality affects the fiscal sustainability of governments and how this effect differs between oil-rich and non-oil developing countries.
Method
The present study estimates the aforementioned model once for oil-rich developing countries and once for non-oil developing countries using panel data models and the PCSE technique, with Stata 17. After estimating the models, the results of the two models were compared using a Z-test.
Results
Since the Hausman test confirmed the fixed-effects model, the Wald test confirmed the presence of heteroskedasticity, and the Wooldridge test confirmed first-order autocorrelation in the error terms for both groups of countries, and given that the number of cross-sections (N) is larger than the time periods (T), the PCSE estimator is used for estimation. The results for oil-rich developing countries indicate a negative relationship between the rule of law, corruption control, regulatory quality, and budget deficit fluctuations. In non-oil developing countries, a negative relationship between institutional quality indicators and budget deficit fluctuations was confirmed. A comparison of the results between the two groups shows that the impact of corruption control and regulatory quality on budget deficit fluctuations is stronger in oil-rich developing countries.
Conclusion
According to the findings, the effects of corruption control and regulatory quality on budget deficit fluctuations are stronger in oil-rich developing countries, while the effect of the rule of law is stronger in non-oil developing countries.
Public Sector Economics
Shahryar Zaroki; Mehdi Hasanpour Varkolaei; Ebadollah Aghaei Anarmarzi; Fatemeh Azhari
Abstract
Economic welfare, as a key indicator of development, plays a vital role in improving living standards and the economic sustainability of countries. One of the factors influencing economic welfare is the size and growth of the population. Therefore, understanding the impact of population growth ...
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Economic welfare, as a key indicator of development, plays a vital role in improving living standards and the economic sustainability of countries. One of the factors influencing economic welfare is the size and growth of the population. Therefore, understanding the impact of population growth on economic welfare is crucial for informing policy decisions. To this end, the present study aims to investigate the effect of population growth on economic welfare in Iran during the period of 1971 to 2023, using two autoregressive distributed lag (ARDL) models, symmetric and asymmetric (NARDL). The results of the first (symmetric) model show that population growth has a negative effect on economic welfare in both the short and long term. The results also indicate that per capita income, economic growth, and government size have a positive and significant effect on economic welfare. The inflation rate also has a negative and significant effect on welfare, while the unemployment rate has no significant effect. The results of the second (asymmetric) model also show that an increase in population growth (positive shocks) negatively impacts economic welfare, while a decrease in population growth (negative shocks) has no significant effect. The other results also indicate that per capita income, economic growth, and government size have a positive and significant effect on economic welfare. The inflation rate also has a negative and significant effect on welfare, but the unemployment rate does not have a significant effect on economic welfare. According to the findings of this study, adopting policies based on controlling and regulating the level of population growth, along with effective policies in managing inflation and strengthening production, can play an important role in increasing economic welfare and achieving sustainable development in the country.
Introduction
Economic welfare is an important indicator of development and quality of life, and achieving a desirable level of it is the goal of development policies. Researchers examine factors such as economic policies, institutional structures, technology, inflation, economic fluctuations, and population growth. Population growth can have a positive or negative impact on this indicator. In recent decades, the relationship between population growth and economic welfare has gained importance, particularly in developing countries like Iran. Population growth may increase the need for public services, education, and health, but it puts pressure on resources and infrastructure, which affects welfare. A gradual decrease in population facilitates sustainable development, but its decline leads to population aging and economic, social, health, and cultural problems. At the macro level, population decline increases welfare and retirement costs, reduces the labor force, and decreases productivity. Also, a decline in population growth leads to a decrease in savings and slows economic growth. As a result, population balance and understanding its long-term relationship with welfare is important for policymaking. In recent decades, Iran has faced sanctions, exchange rate fluctuations and inflation, reduced trade, increased inflationary expectations, a shortage of supply expenditures, and a decline in purchasing power, which has made the economy challenging. Changes in government revenue cause exchange rate and GDP fluctuations and financial shocks, affecting prices and inflation. Studies in developing countries show differences in the relationship between population growth and welfare; some show a negative relationship and some show complex relationships. Piketty suggests that if population growth and per capita production were independent, higher population growth would contribute to economic growth. However, if it affects per capita growth, a high rate of population growth can affect growth and inflation, and new methods of analysis have made these relationships possible. This article uses a composite index of economic welfare in Iran for the first time, which provides a more comprehensive analysis. The effect of the population growth rate on Iran's welfare in the period 1350-1402 (1971-2023) has been investigated using autoregressive methods, both long-term and short-term. The findings emphasize the importance of population and economic policies for sustainable development and can guide policymakers in developing long-term strategies to facilitate development and improve the quality of life.
Research Question(s)
Does population growth affect economic welfare in Iran?
Does population growth have a positive effect on economic welfare, or a negative effect?
Does population growth have an asymmetric effect on economic welfare?
Methods and Material
In this research, the Composite Index of Wellbeing (IEWB) is used to assess economic welfare, which considers the dimensions of effective consumption, wealth stock accumulation, income inequality, and economic insecurity, with the weight of each dimension varying based on observations. Its general form is as follows: IEWB=CF+WS+ID+ES. The welfare index has been calculated for the period 1350-1402 (Iranian calendar) using the aforementioned method. The aim of the study is to investigate the impact of population growth on welfare, using ARDL and NARDL models, which allow for the analysis of short-term and long-term relationships and the asymmetric effects of shocks. NARDL allows for the separation of positive and negative effects of variables; therefore, the impact of increasing and decreasing population growth rates on welfare is examined separately. The following specifies the unrestricted Autoregressive Distributed Lag (ARDL) model:
In the second model, based on the autoregressive distributed lag (ARDL) method with asymmetric lags (NARDL), it is specified in the following equation:
Results and Discussion
Before estimating the model, the stationarity of the variables was examined using the Augmented Dickey-Fuller and Phillips-Perron tests. The results indicate that only economic growth is stationary at the level; the other variables become stationary after first differencing. Accordingly, linear and nonlinear autoregressive models can be used. Diagnostic tests show that the hypotheses of no autocorrelation, normality, homoscedasticity, and homogeneity of variance are not rejected. The bounds test also confirms the existence of a long-run relationship between the variables with 90% confidence; therefore, the null hypothesis of no long-run relationship is rejected. In the autoregressive distributed lag model, the optimal lag was selected based on the Schwarz-Bayesian information criterion (minimum of 3). The estimation results indicate that population growth has a negative effect, and per capita income has a positive effect on welfare. Inflation has a negative effect, and economic growth has a positive effect, as does the size of government. The unemployment rate has no significant effect, and the sanctions variable has a negative effect, such that welfare has decreased during this period. The error correction coefficient is significant and indicates that approximately 64% of the welfare deviation is corrected in each period. The long-run results indicate that population growth with a negative coefficient has an inverse relationship with welfare, and per capita income with a positive coefficient improves welfare. Inflation with a negative coefficient has a negative effect on welfare, and economic growth with 0.27 has a positive effect, increasing the level of welfare. The size of government has a positive effect in the long run, and the unemployment rate has no significant impact.
Also, in the second model, the optimal lag was selected as 3 based on the Schwarz-Bayesian criterion in the minimum state. The results show that an increase in population growth has a negative impact on welfare; a decrease in growth has no significant effect, which indicates asymmetric behavior in its impact. Per capita income has a positive effect, inflation has a negative effect, and economic growth has a positive effect. The effect of government size is positive in the short term, but the unemployment rate has no significant effect. The post-JCPOA (Joint Comprehensive Plan of Action) impact is negative, and welfare has decreased by about 14 units in the period 1396-1402 (Iranian calendar). The error correction coefficient is significant and shows that 60% of the welfare deviation is adjusted each year. In the long run, increasing population growth reduces welfare. Population decline has no significant effect. Per capita income has a positive effect on welfare. Inflation has a negative long-term effect, economic growth has a positive effect, and government size also has a positive effect, but the unemployment rate has no significant effect.
Conclusion
Population growth is a significant factor in economic and social dynamics, influencing age structure, migration, inequality, the labor market, and production capacity. Malthus (1798) believed that rapid population growth would lead to reduced welfare and poverty in the long run because increased income for the poor would lead to population growth and decreased productivity. Recent research, such as Peterson (2017), has shown that population growth in low-income countries, especially with high fertility rates, has negative consequences, while decreased mortality has more positive effects. The results of this study, using linear and non-linear autoregressive models, indicate that the average economic welfare in Iran during 1350-1402 (1971-2023) is about 44.26 percent. Welfare had an upward trend in the 1350s (1970s) but fluctuated later, reaching 62.62 percent during the Fifth Development Plan and decreasing from 1399 to 1402 (2020-2023), coinciding with the post-JCPOA sanctions. The NARDL model shows that population growth negatively impacts welfare, but a decrease in population growth has a positive, though insignificant, effect. Without sufficient infrastructure, uncontrolled population growth puts pressure on resources and reduces welfare. Long-term inflation has a strong negative effect on welfare, while economic growth and per capita income improve the situation, according to the growth and Friedman's permanent income theories. Government size also has a positive effect, indicating the government's role in services and welfare. The unemployment rate does not have a significant effect, perhaps due to structural or support reasons. The results suggest that population policymaking in Iran should be done carefully and based on economic and social capabilities. Population growth can contribute to economic growth in some circumstances, but without the necessary infrastructure, it can negatively affect welfare. Policies should aim for an optimal growth rate. The experience of economically successful countries shows that combining population policies with economic policies such as subsidies and tax exemptions provides a balance between growth and welfare. Future research should focus on determining the optimal point of population growth and examining its complex relationship with welfare in the country's institutional structure. Also, studying the difference in the optimal rate in different regions can design effective regional policies and be an important tool for policymakers in areas such as family, education, and employment.
The Economics of Technology, Energy and Sustainable Development
Sanaz Shahbazi; Hassan Heidari; Mehdi Nejati
Abstract
Concerns about energy prices, environmental sustainability, and economic stability highlight the need to examine the effects of energy market liberalization, as fluctuations in oil and gas prices have profound impacts on economic and environmental variables. This study, based on a dynamic computable ...
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Concerns about energy prices, environmental sustainability, and economic stability highlight the need to examine the effects of energy market liberalization, as fluctuations in oil and gas prices have profound impacts on economic and environmental variables. This study, based on a dynamic computable general equilibrium model and GTAP-E database, investigates the impact of energy price liberalization on environmental variables and mineral products across three country groups—Iran, its major trading partners, and the rest of the world—under two scenarios: (1) a 5% gas price shock and (2) a 5% oil price shock, projecting up to the year 2050. The simulation results show that for Iran, the first scenario leads to a gradual and sustained reduction in carbon dioxide emissions, reflecting a negative relationship between CO₂ emissions and gas prices due to decreased fossil fuel consumption and a shift towards more efficient or alternative energy sources in mineral production. The second scenario results in a smaller but still significant reduction in carbon dioxide emissions. For Iran’s trading partners, the first scenario results in a long-term emission reduction owing to higher production costs and adoption of cleaner technologies, while the second scenario leads to faster reductions due to the mining sector’s dependency on oil and accelerated investments in energy-saving measures. For other regions, the first scenario shows an initial moderate reduction in carbon dioxide emissions followed by a temporary rebound, indicating delayed decarbonization; scenario two, however, leads to a sustained decline, underscoring the key role of oil in energy and mining sectors. The findings emphasize that energy price liberalization must be aligned with market realities and should promote improved consumption efficiency and innovation in clean technologies.
Introduction
Energy market liberalization, particularly through the removal of subsidies and the alignment of domestic energy prices with international levels, has been a subject of growing interest due to its potential implications for economic efficiency, fiscal sustainability, environmental outcomes, and energy security. Fluctuations in oil and gas prices significantly influence macroeconomic variables, industrial competitiveness, and greenhouse gas emissions, particularly in resource-dependent economies like Iran. This study adds to the existing literature by using a dynamic computable general equilibrium (DCGE) model based on the GTAP-E database, an extension of the standard GTAP framework that explicitly incorporates energy substitution, fossil fuel combustion, and CO₂ emissions (Burniaux and Truong, 2002) to analyze the long-term effects of energy price liberalization on CO₂ emissions in mineral production sectors.
While prior research has utilized GTAP-E in static or limited dynamic contexts, the application of a fully dynamic version with intertemporal adjustments, solved using GEMPACK algorithms and drawing on comprehensive regional and sectoral data from the GTAP database, represents a methodological advancement. This approach enables detailed projections up to 2050 and captures sector-specific responses in mineral industries, which are particularly energy-intensive and play a key role in Iran's economy and trade. The central research question is: How does energy price liberalization modeled as exogenous shocks to natural gas and oil prices affect CO₂ emissions in mineral production across Iran, its major trading partners, and the rest of the world?
Methods and Material
This study employs the Global Trade Analysis Project-Energy (GTAP-E) model, a multi-region, multi-sector, multi-agent computable general equilibrium (CGE) framework developed by Burniaux and Truong (2002). GTAP-E extends the standard GTAP model (Hertel, 1997) by explicitly incorporating energy substitution mechanisms and the linkage between energy consumption and greenhouse gas emissions, particularly CO₂ emissions from fossil fuel combustion. This allows for a detailed analysis of the environmental and economic impacts of energy price changes across sectors, regions, and agents. The multi-regional structure of GTAP-E provides significant advantages over single-region models by capturing inter-sectoral, inter-country, and inter-factor linkages on a global scale (Wu et al., 2019). Computable General Equilibrium (CGE) models have been widely applied in energy and environmental policy analysis since the 1980s, offering a consistent framework for evaluating the economic and environmental consequences of policy interventions (Rao et al., 2017; Chi et al., 2014). Their comprehensive treatment of resource allocation distortions caused by energy subsidies further justifies their use in this context (Manzoor et al., 2021).
To capture long-run dynamics and cumulative effects of policy reforms, this study employs a dynamic version of the GTAP-E model (DCGE). Unlike static CGE models, which are limited in their ability to account for growth effects, capital accumulation, and transitional paths, dynamic CGE models incorporate intertemporal adjustments, enabling realistic projections of medium- to long-term impacts where short-run and long-run effects may differ substantially (Zhang et al., 2020). The model is calibrated using the GTAP-E database and solved with GEMPACK software, allowing for the simulation of exogenous energy price shocks and their propagation through the global economy up to 2050.
Results and Discussion
Carbon intensity (CO₂ emissions per unit output) measures sectoral carbon efficiency. Table 4 reports changes under two 5% price shock scenarios—gas (Scenario 1) and oil (Scenario 2)—for Iran, trading partners, and other regions. The moderate price shock corresponds to historical fluctuations, consistent with prior studies (Eskandaripour et al., 2023; Lebrand et al., 2023).
In Iran, Scenario 1 reduced intensity markedly in oil (-26.22%), industry (-42.6%), minerals (-11.09%), and services (-13.27%) via cost-induced efficiency, but increased electricity (+46.9%) due to substitution to dirtier fuels (Barro et al., 2025). Gas intensity fell (-8.37%). Scenario 2 raised intensity in oil (+26.39%), gas (+4.69%), industry (+10.74%), and electricity (+16.73%) from fuel switching, while lowering it in agriculture (-16.12%), minerals (-8.93%), and services (-8.63%).
Trading partners exhibited heterogeneous responses: Scenario 1 increased gas (+0.52%) and coal (+0.23%) most; Scenario 2 amplified oil (+1.31%) and coal (+1.69%) rises, offset by non-energy sector declines. Other regions showed mostly reductions under Scenario 1 (except gas +0.65%, coal +0.29%), but energy sector increases under Scenario 2. Asymmetric patterns reflect fuel substitutability and sectoral vulnerabilities, implying uneven carbon pricing effects.
Table 5 shows fuel-specific CO2 emissions. Iran’s Scenario 1 raised oil/petroleum emissions but cut gas (-61.64%) and coal; Scenario 2 reversed oil trends. Trading partners shifted to coal/gas in Scenario 2; other regions reduced gas/petroleum more in Scenario 1 and oil in Scenario 2. Both scenarios trended downward overall.
Long-term mineral products CO2 emissions (Table 6, 2023–2050) declined steadily in Iran under Scenario 1 (~ -26.7 to -34 units) via efficiency incentives (Mosavi et al., 2017; Attílio et al., 2024), and less sharply under Scenario 2 (~ -9.5 to -12 units) due to lower oil substitutability (Ebaid et al., 2022). Trading partners had sharper Scenario 2 reductions (-0.95 by 2050); other regions showed sustained deepening under Scenario 2 (-0.87), consistent with oil-driven decarbonization and EKC dynamics (Kuznets, 1955; Zhou et al., 2021).
Gas shocks yield rapid gas-sector efficiency but risk dirty substitution in electricity; oil shocks promote broader long-term decarbonization. Policies should address substitution risks and facilitate technological transitions.
Conclusion
This study utilizes a dynamic computable general equilibrium (DCGE) model based on GTAP-E (version 10) data to simulate the effects of two energy price shocks—a 5% increase in natural gas prices and a 5% increase in oil prices—from 2023 to 2050. The results highlight distinct emission reduction pathways for Iran, its major trading partners, and the rest of the world, offering important insights for energy transition and climate mitigation policies.
In Iran, a natural gas price shock drives a gradual and sustained decline in greenhouse gas emissions, reflecting substitution toward cleaner energy sources and improved energy efficiency in mineral production. An oil price shock produces a milder but steady reduction, indicating lower substitutability in industrial sectors. These responses are consistent with the Environmental Kuznets Curve, where higher energy prices stimulate emission-reducing investments, with effects varying depending on sector-specific energy dependence and technological capacity. The reductions also stem from cleaner production technologies and a shift to low-carbon mineral products, consistent with Khan et al. (2022) and Antimiani et al. (2014).
Iran’s trading partners show a slow but steady emission decline under the gas price shock due to initial inelastic demand and subsequent technological adjustments. Oil price shocks lead to faster and sharper reductions, driven by greater oil reliance in their mineral sectors and stronger incentives for energy-saving innovations—patterns similar to those in developed industrial economies.
In other world regions, natural gas price increases result in an initial decline, temporary rebound, and eventual sustained reduction, reflecting structural rigidities and transition dynamics. Oil price shocks, however, cause more consistent and substantial declines, emphasizing oil’s pivotal role in global energy and industry.
Overall, energy price liberalization can effectively reduce greenhouse gas emissions, especially when supported by policies that promote technological innovation, energy efficiency, and cleaner alternatives in energy-intensive sectors. Region-specific policies are essential to balance environmental gains with economic impacts.
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