The Impact of Behavioral Biases in Government Decision-Making on the Quality of Economic Governance in Iran

Document Type : Original Article

Authors

1 Department of Economics, Faculty of Economics and Political Sciences, Shahid Beheshti University

2 economics

10.48308/jem.2026.243372.2040

Abstract

Governance is one of the most fundamental concepts in economics and political economy, attracting the attention of both scholars and policymakers. Economic governance constitutes a key subdomain of overall governance; at the same time, the two are so deeply interrelated that separating them is difficult and, in some cases, impossible. A strategic objective of governments is to apply the principles of good governance within the economic system. One underlying assumption is that insights from behavioral economics have the capacity to contribute to improvements in governance. Accordingly, one of the aims of this paper is to examine the effects of behavioral biases in government decision-making on the quality of good governance in Iran over the period 1379–1403, drawing on theories of governance and behavioral economics and employing the Generalized Method of Moments (GMM). The model estimation results indicate that, when the role of behavioral biases is taken into account, the GDP growth gap, inflation rate, the share of the budget deficit in GDP, and the ratio of oil revenues to the government’s current expenditures have had significant negative effects on good governance and its components. On this basis, greater attention by senior public-sector governors and policymakers to behavioral biases can have a meaningful impact on economic variables.

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