The effect of credit development on the diversity of industrial activities in the provinces of Iran

Document Type : Original Article

Authors

1 Associate Professor of Economics, Department of Economics and Islamic Banking, Faculty of Economics, Kharazmi University, Tehran, Iran

2 Instructor and member of the academic faculty of economics, Faculty of Economics, Kharazmi University, Tehran, Iran

3 Master of Economics, Khwarazmi University, Tehran, Iran

10.48308/jem.2024.233675.1876

Abstract

One of the important conditions for achieving higher economic growth is the existence of an efficient financial system in order to gather financial resources from surplus units and direct them to sectors with higher added value such as industry. Considering the importance of the diverse structure of the industry in order to benefit from the maximum intra-industry communication, this study aims to investigate the effect of credit development on industrial diversity over 2009-2019 at province level. Estimation of industrial diversity using Herfindahl-Hirschman index shows that Tehran province has the highest industrial diversity equal to 0.91 and Bushehr province has the lowest industrial diversity equal to 0.2. The results of estimations using the GLS method of panel data show that credit development has a positive and significant effect on industrial diversity, but the size of the government and economic growth have increased industrial concentration, and finally industrialization plays an important role due to intra-sector connections in industrial diversity. Therefore, the government's focus on infrastructure improvement considering the industrial advantage in Iran's provinces and the allocation of credits for the development of various industrial sectors and limited support for infant industrial sectors are the most important policies to improve industrial diversity.

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Journal of Economics and Modelling
Volume 14, Issue 2 - Serial Number 54
September 2023
Pages 37-68

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