Measuring the Relative Advantage of Economic Activities in the Provinces of Iran: Location Quotient Approach

Authors

• S.Narges Aghamohammadi ¹
• Gholamali Haji ²
• Hadi Ghafari ³
• Peyman Ghafari Ashtiani ⁴

¹ PhD. Student of Economics, Arak Branch, Islamic Azad University, Arak, Iran.

² Assistant Professor, Department of Economics, Arak Branch, Islamic Azad University, Arak, Iran.

³ Associate Professor, Department of Economics, Payam Noor University, Arak, Iran.

⁴ Associate Professor, Department of Business Management, Arak Branch, Islamic Azad University, Arak, Iran.

Abstract

In the discussion of regional economy and considering the Scarcity of resources and facilities available, understanding the economic characteristics and advantages of each province enables better planning for the achievement of development goals. Realizing national development requires recognizing the economic benefits of different regions of the country. The purpose of this article is to identify the relative advantage of the economic subdivisions of the provinces during the years 2005-2015. The instrument is a measurement of the basic economy model and the location quotient (LQ) calculated using data from the regional accounts of the Central Bank of Iran and the Statistics Center of Iran for 30 provinces. The location quotient indicate the relative importance of an activity in the region relative to the relative importance of the same activity in the national economy and has been used by researchers in economic geography and regional economics. Surveys in this article show that agriculture, hunting and forestry, building, education, health and social assistance, hotels and restaurants have a recognized advantage in most provinces. Whereas the economic activities of industry, water and electricity, gas, transportation and public administration in most of the provinces have lost their advantage, often fishing, mining and financial intermediaries in the provinces have no advantage. Surveys also show that in terms of value-added share of total productions of the country, the services sector is at the first place with 51.7 percent, industry sector is at the second place with 38.7 percent and agriculture sector is at the third place with 9.6 percent. The results of the location quotient method show that according to the fifteen subdivisions, the priority activities in each province. Therefore, it is necessary for national and regional planners to make decisions regarding investment, resource allocation and budget adjustment in order to lead to economic growth in the country.
Keywords: regional economic, relative advantage, location quotient, economic sectors.
 



 


 
 



Extended Abstract
Introduction:
 Economic growth and development of the country has always been one of the most important issues in the regional economy. The realization of national development requires recognition of the economic opportunities and advantages of different regions of the country. In national development planning, the economic potential of the regions is not given much attention. Despite the implementation of numerous national and regional development programs, the underdevelopment process continues. Therefore, recognizing these advantages is essential for formulating and implementing effective economic development policies (Sobhani & Darvish, 2005: 163). In this paper, the location coefficient is used to evaluate the relative advantage. LQ; A simple ratio of the share of a particular activity of the total activity of a region to the share of the same activity in total activity in the national economy is defined. The location coefficient was first introduced by Sergeant Florence. A method that mathematically evaluates the regional economy as opposed to the larger reference economy, usually the national economy (Florence, 1943: 128-130). In this index, variables such as sector value added, sector production rate, employment rate, investment rate, etc. Each of the province's economic activities are measured against the same variable in the country.
Methodology:
This is an analytical-descriptive and applied study. Required data were extracted from data on regional accounts of the Central Bank and the Statistics Center of Iran. The measuring tool of this paper is the basic economy model and the spatial index, Data processing and classification using Excel software for the years 2005 and 2015 calculated at the provincial level and the data were analyzed accordingly. The statistical population used is 30 provinces from 31 provinces of Iran for 2005 and 2015. Since there is no information about Alborz province before 2011, Therefore, this province is considered as a whole with Tehran province.
Result and Discussion:
The following fifteen sections have been considered to examine economic activity: agriculture, hunting & forestry, fishing, mining, industry, water & electricity, building, wholesale & retail & vehicle repair, hotel & restaurant, transportation & warehousing & communications, financial intermediaries, real estate & rental, public works & utilities, education, health and social work and other public and social services.
If the location quotient index is greater than one, the desired activity is basic and if it is smaller than one, it is called non- basic. (Hoan & Oosterhaven, 2006: 677-691). We also examine the share of sector employees in the provinces in examining the advantages of economic sectors. Only in North Khorasan this share belongs to agriculture and in Markazi and Yazd provinces to industry. The highest share of service workers belonged to Bushehr, Tehran and Qom respectively and the lowest to North Khorasan and Zanjan respectively. The largest share in the industry is allocated to Yazd, Markazi province, Qom and Isfahan and Kermanshah and North Khorasan respectively. Services are mostly related to North Khorasan, Kerman and Ardabil and least to Tehran, Qom and Yazd. In order to better analyze the comparison of provincial spatial coefficients during these two years is considered as 1.25. The situation of the provinces is growing, declining, steady, emerging, declining and disadvantaged (Tian, 2013: 187-197 ؛ Mirzaei et al, 2012: 205).
Conclusion:
In the discussion of regional economy and considering the Scarcity of resources and facilities available, understanding the economic characteristics and advantages of each province enables better planning for the achievement of development goals. Realizing national development requires recognizing the economic benefits of different regions of the country.
The results of this study indicate that; similar to other studies, the basic activity model and the coefficient of location quotient are generally a good method for assessing the status of economic activities in different regions. Therefore, it is recommended that national and regional planners have a comparative advantage in identifying the basics and activities in each province.
In agriculture and forestry sector, out of 30 provinces, except Isfahan, Bushehr, Tehran, Khuzestan, Qom and Kohgiluyeh, activity in other provinces is a base. But despite advances in agriculture and forestry, during the ten-year period studied in Khorasan Razavi, North and South Khorasan, Hamadan and Kurdistan are on the risings, in Ilam and Yazd and in the rest of the privileged provinces, are declining. The advantage of the fishing sector during the period 2005-2015 except for Zanjan, Kohkiluyeh and Lorestan has been declining in the rest of the provinces. In the mining sector over the ten-year period only Khuzestan and Kohgiluyeh show an improving trend. Industry advantage in Zanjan and Qazvin has been growing. In the water, electricity and gas sectors, only the advantage of Fars and Bushehr provinces is growing. The building sector in 2005 was basic in all provinces except Ilam, Bushehr, Tehran, South and North Khorasan, Khuzestan, Kerman, Kermanshah, Markazi and Kohgiluyeh. Only West Azerbaijan shows a rising trend. The advantage of wholesale, retail and repair of equipment during the ten year period in East Azerbaijan, Tehran, Khorasan Razavi, North and South, Qom, Kurdistan, Golestan, Gilan and Mazandaran is decreasing. Only in Ardabil has the growing trend. Hotel and Restaurant In 2015, about 30% of the provinces are recognized as basical activity. The transport and communications sector in most of the provinces has been declining. The activity of financial intermediaries during the period of Tehran alone has been a growing trend. Ins the real estate, renting and business sector over the ten-year period only Golestan province is growing and Hamadan is emerging. Education in most provinces is a well-known base, though only in Semnan, North Khorasan, Golestan, and Kurdistan over the ten-year period, there is a rising trend and an advantage in Ilam. The advantage of this section illustrates the downward trend in the rest. The advantage of health activities has only increased in West Azerbaijan, Chaharmahal, Zanjan, Kurdistan and Hamedan.

Keywords

• Regional Economy
• Economic Sections
• Comparative Advantage
• Location Quotient (LQ)

20.1001.1.22516735.1399.10.40.3.7

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