THE EFFECT OF THE CRITERIA OF NEED AND CAPACITY IN GOVERNMENT'S BUDGET APPROPRIATIONS ON ECONOMIC DEVELOPMENT OF IRAN'S PROVINCES

This study aims to evaluate government's policies of budget appropriation to provinces. It seeks to estimate the effect of considering provinces' capacity and needs in government's budget appropriation on their economic development. First, the two criteria of provinces' need and capacity are defined and accordingly, indices are proposed for government's budget appropriation to provinces. Then, the provincial data of 2000 to 2009 were collected and the trends and differences were analyzed. The growth model was estimated using panel data econometrics. Gross domestic production and its growth was the dependent variable, and capital stock, labor, the two criteria of provinces' need and capacity in the government's budget appropriation were explanatory variables. The main results are that when the government's budget appropriation exceeds the capacity of the province, it has a negative effect on its production and growth, but if budget appropriation to needy provinces is more than their need, it has a positive effect on their economic growth.