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Abstract
This dissertation develops several economic planning models for analyzing policies which would provide solutions for some of the existing economic problems and also promote the present rate of economic growth for the Iranian economy. The study first searches for an appropriate theoretical base, given the country's current economic conditions. Barro's model (1990) is found to be suitable for proper economic transition in the earlier stage of economic change, where the analysis of a version of the model provides insight into the determination of all optimal overall tax rate. This model is also useful in analyzing the appropriate size of the government and indetermining the flow of resources for infrastructure purposes. Next, to carry out a more detailed analysis of government policies, Barro's model is generalized and, with the inclusion of a few other features, a two-sector endogenous growth model is developed. The resulting model incorporates the important role of government sectoral expenditures and taxation in affecting economic growth and assigns a central role for human capital accumulation. Moreover, the model is structured to incorporate the concern of the development theorists regarding the dualistic nature of the economy. The model postulates that economic growth is based on expansion of the education sector and that the growth rate of the economy increases with (1) efficiency and breakthroughs of this sector and (2) the willingness of the populous to expand their knowledge and skills. In this model with government at its optimal size, economic growth will be at its highest rate when all inputs from the education sector are subsidized by the highest possible amount.
The proposed multi-sectoral growth model modifies and extends the two-sector endogenous growth model by incorporating additional sectors and applying "composition of government expenditure," where the effects of different government expenditure programs on economic growth are evaluated. In all models, the government plays a vital role in determining long-run economic growth. The highly aggregated and two-sector endogenous growth models, in particular, conclude that the nation can advance and prosper (or stagnate and decay) depending on proper (of improper) fiscal and institutional policies. In these models whether the economy stagnates or grows is directly related to government policy choices.
