Identification of the Binding Constraints of Export Led Growth in Iran: Decision Tree Method Approach

Document Type : Original Article


1 Ph.D Candidate in Economics, Faculty of Economics, University of Tehran, Tehran, Iran

2 Associate Professor of Economics, Faculty of Economics, University of Tehran, Tehran, Iran


Economic growth, as one of the most important macroeconomic goals of the nations has always been at the center of the attention of economists, politicians, and policymakers. Hence, identifying the factors stimulating, improving, and accelerating it, is of special importance and necessity. Among the factors, exports have played a very critical role in economic growth of countries. In this article, applying the method of decision tree diagnosis, the binding constraints of export led growth in Iran are identified. The results show that as long as the price non-competitiveness is concerned, the binding constraints include micro risks (high corruption), macro-risks (high budget deficit), and high costs of production (low labor productivity). Concerning the low income elasticity of demand for exports, the binding constraints include low quality of export products (low technology) and low value added of export commodities (weak institutions and small market size). In addition to this, the results show that the non-competitiveness of prices, as compared to low income elasticity of demand for exports, is recognized as the main (or binding) constraint of Iran's exports.


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