The Institutional Impact on Economic Development in Iran

Abstract

The impact of institutional environment on economic development was well demonstrated in the closing decades of the twentieth century, and this trend has continued apace into the twenty-first century. The significance of this finding has been made especially clear after the 2007–2012 financial crisis. The status of institutional factors including rule of law, quality of law, political stability, democratic institutions, trust and confidence in the business environment has been seen to alter the economic development of several countries. Institutional improvements have reduced economic uncertainties, lowered transaction costs, increased market competition and more. The effects on development of having good institutions have been determined by motivating economic incentives, enhancing productivity, and eventually increasing per capital income and social welfare. This chapter tests the impact of institutions on economic development in Iran during the 1996–2016 period. The findings of the research detailed herein highlight the urgent need for institutional improvements in Iran so as to enhance sustainable growth and development.