From the SelectedWorks of Prof. Dr. Mohammad Reza Farzanegan Summer September 13, 2013 Economics of Iran and Israel: Comparative Examination Mohammad Reza Farzanegan Available at: http://works.bepress.com/mr_farzanegan/25/
Economics of Iran and Israel: Comparative Examination JProf. Dr. Mohammad Reza Farzanegan Email: farzanegan@uni-marburg.de http://www.uni-marburg.de/cnms/wirtschaft 13 September 2013, CNMS, Fachgebiet Wirtschaft des Nahen und Mittleren Ostens/ Martin-Luther Schule (MLS) Meeting
Overview of Middle East Economics @ CNMS 1. The only Middle East Economics Department as a part of Faculty of Economics at the level of University in Germany. 2. We offer specialized courses and seminars at BA and MS programs: Schwerpunkte BA Orientwissenschaft Wirtschaft: http://www.unimarburg.de/cnms/studium/studiengaenge/baow/studiengangsprofil/schwerpunkte Master PoWo (Politik und Wirtschaft des Nahen und Mittleren Ostens): http://www.uni-marburg.de/cnms/politik/studium/ma-powo Master Economics of the Middle East (EMEA): http://www.unimarburg.de/fb02/emea 2 We offer also possibilities for doing a PhD
Overview of Middle East Economics @ CNMS 1. Our department at CNMS is a part of Fachbereich Wirtschaftswissenschaften 3
Overview of Middle East Economics @ CNMS 1. And also affliated to MACIE - Marburg Center for Institutional Economics http://www.uni-marburg.de/fb02/macie 4
Overview of Middle East Economics @ CNMS In addition to our teaching activities we put strong emphasize on research. Our main fields of research interests are: Wirtschaftliche Ursachen und Folgen des Arabischen Frühlings Ölreichtum und Ressourcenfluch Demografischer Wandel, Globalisierung, Armut, Arbeitslosigkeit Klimawandel, Wasser- und Nahrungsmittelknappheit 5
Overview of Middle East Economics @ CNMS More details about Middle East Economics at CNMS: http://www.unimarburg.de/cnms/wirtschaft/ 6
Overview of Middle East Economics @ CNMS Stay Connected in Facebook: https://www.facebook.com/menaecon 7
Agenda Introduction of economic, social, political and demographic indicators Examining key indicators in Iran before and after Islamic Revolution Comparing key indicators of Iran with Israel We will learn about Resource Curse We will learn about Demographic Transition Future Outlook 8
A Short Film on Political Development in Iran (Shah, Revolution) Iran der Wille zur Großmacht (Democracy for Shah, Khomeini) (07/10) Iran der Wille zur Großmacht ARTE DOKU (Revolution, Hostage US Embassy) (08/10) Iran der Wille zur Großmacht ARTE DOKU (War with Iraq and death of Ayatollah Khomeini and Atom Program) (09/10) Iran der Wille zur Großmacht ARTE DOKU (11 September, Iraq and Afghanistan, Israel, Atom Program) 9
10 Where is the Middle East and North Africa (MENA)?
Ranking of MENA Countries Based on the Size 3000000 Surface area (sq. km) 2500000 2000000 1500000 1000000 500000 0 Algeria Saudi Libya Iran Egypt Yemen Morocco Iraq Oman Syria Tunisia Jordan UAE Djibouti Israel Kuwait Qatar Lebanon West Bank Bahrain Malta 11
Ranking of MENA Countries Based on the Size 12 Millionen 90 80 70 60 50 40 30 20 10 0 75.424285 Population, total 7.7659 Egypt Iran Algeria Morocco Iraq Saudi Yemen Syria Tunisia UAE Israel Jordan Libya Lebanon West Bank Kuwait Oman Qatar Bahrain Djibouti Malta
Ranking of MENA Countries Based on the Income per citizen Tausende 60 50 40 30 20 10 0 Income per person (constant 2005 US$) 21,000 USD 3,000 USD Qatar Kuwait UAE Israel Malta Oman Bahrain Saudi Libya Lebanon Tunisia Iran Algeria Jordan Morocco Syria Egypt Iraq Djibouti Yemen 13
14 Ranking of MENA Countries Based on the Human Development Index (index für menschliche Entwicklung) 1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 0.90 Human Development Index (HDI) 0.74 0.69 Israel Malta Qatar UAE Bahrain Kuwait Saudi Libya Lebanon Iran Oman Algeria Tunisia Jordan World Occu-Palestinian Egypt Syria Morocco Iraq Yemen
Components of Human Development Index 1- Life Expectancy at birth (Lebenserwartung bei der Geburt) 2- Mean years of Schooling (Erfolgte Schulbildung (Mittelwert in Anzahl Jahren)) HDI 3- Expected years of schooling (Erwartete gesamte Ausbildung (Mittelwert in Anzahl Jahren)) 4- Income per capita (Bruttonationaleinkommen (BNE) pro Einwohner) 15
16 Human Development Index
Ranking of MENA Countries Based on Health Spending per capita 2500 2000 Health expenditure per capita- Average 2000-2011 (US dollar per person) $ 1,903 1500 17 1000 500 0 $ 604 127 Qatar Israel Malta UAE Kuwait Bahrain Lebanon Saudi Oman Iran Libya Tunisia Jordan Algeria Egypt Morocco Syria Iraq Djibouti Yemen
Ranking of MENA Countries Based on Life Expectancy 18 90 80 70 60 50 40 30 20 10 0 Life expectancy at birth, total (years) - Average 2000-2011 81 years 71 years Israel Malta Qatar UAE Syria Bahrain Kuwait Libya Tunisia Oman Saudi Jordan West Bank Algeria Lebanon Egypt Iran Morocco Iraq Yemen Djibouti
Ranking of MENA Countries Based on Military Budget 12 Military expenditure (% of GDP)- Average 2000_2011 10 8 8% 6 4 3% 2 19 0 Oman Saudi Israel Jordan Yemen Djibouti UAE Kuwait Syria Lebanon Bahrain Iraq Algeria Morocco Iran Qatar Egypt Libya Tunisia Malta
Ranking of MENA Countries Based on Education Budget 20 10 9 8 7 6 5 4 3 2 1 0 Djibouti Public spending on education, total (% of GDP)- Average 2000_2011 Yemen Saudi Tunisia 6% Israel Kuwait Morocco Malta Syria 5% Iran Algeria Egypt Oman Bahrain Qatar Lebanon UAE
Ranking of MENA Countries Based on Control of Corruption 2.5 2 1.5 1 0.5 Control of Corruption ( 2.5: least corrupt, -2.5: most corrupt)- Ave. 1996_2011 0-0.5-1 -1.5 Israel Malta Qatar UAE Kuwait Oman Bahrain Jordan Tunisia Morocco Saudi Egypt Djibouti Iran Algeria Lebanon West Bank Syria Yemen Libya Iraq -2 21-2.5
Ranking of MENA Countries Based on Freedom 2.5 Voice and Accountability (2.5: most freedom, -2.5: least freedom) 2 1.5 1 0.5 0-0.5-1 Malta Israel Lebanon Kuwait Jordan Morocco Qatar UAE Oman Bahrain West Bank Tunisia Djibouti Egypt Algeria Yemen Iran Iraq Syria Saudi Libya -1.5 22-2
Ranking of MENA Countries Based on Rule of Law 2 Rule of Law 1.5 1 0.5 0-0.5-1 Malta Israel Qatar Oman Kuwait UAE Bahrain Jordan Saudi Tunisia Egypt Morocco West Bank Lebanon Syria Iran Algeria Djibouti Libya Yemen Iraq -1.5 23-2
Ranking of MENA Countries Based on Political Stability (1996_2011) 1.5 Political Stability and Absence of Violence/Terrorism 1 0.5 0-0.5-1 -1.5 Malta Qatar UAE Oman Kuwait Tunisia Libya Bahrain Djibouti Saudi Jordan Morocco Syria Egypt Iran Lebanon Israel Algeria Yemen -1.00-1.36 West Bank Iraq -2 24-2.5
Iranian Economy: before and after revolution 4,000 3,500 3,000 2,500 2,000 Income per person (US dollar), adjusted for inflation Shah Revolution Rafsanjani Khatami, War with Iraq Reformists Ahmadinejad 1,500 1,000 500 Oil based Modernization Reconstruction Political and Social Reforms Populism and Sanctions 25 0 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
A Short Film on Political Development in Iran (07/10) Iran der Wille zur Großmacht ARTE DOKU (Revolution, Hostage US Embassy) (08/10) Iran der Wille zur Großmacht ARTE DOKU (War with Iraq and death of Ayatollah Khomeini and Atom Program) (09/10) Iran der Wille zur Großmacht ARTE DOKU (11 September, Iraq and Afghanistan, Israel, Atom Program) 26
Iranian Economy: Follow the Oil Money 3,500 3,250 160 140 3,000 120 2,750 100 2,500 80 2,250 60 2,000 40 1,750 20 1,500 1970 1975 1980 1985 1990 1995 2000 2005 2010 0 27 real income per capita of Iran (left axis)- USD oil price per barrel (USD, right axis)
100 Iranian Economy: Dependence on Oil oil export (as % of total exports) 96.86 90 80 78.62 84.61 74.86 76.14 70 60 50 40 30 20 10 28 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Iranian Economy: Dependence on Oil 60 oil export (as % of GDP) 50 40 30 20 10 23.24 10.00 14.62 23.80 18.49 29 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Iranian Economy: Dependence on Oil 1800 oil exports per Iranian (US dollar) 1600 1400 1326 1200 1000 800 600 $ 506 696 400 200 0 162 255 30 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Dependence on Oil: Comparing Iran and Israel Oil rents (% of GDP), Average 1993-2009 27.92 0.00 Iran, Islamic Rep. Israel 31
Dependence on Natural Resources: Comparing Iran and Israel Total natural resources rents (% of GDP) 35.07 0.15 32 Iran, Islamic Rep. Israel
33 Natural resource wealth: comparative picture
Dependence on Natural Resources: Comparing Iran and Israel We call Israel a Resource Poor Country And Iran a Resource Rich Country The Problem of Resource Curse (Ressourcenfluch) 34
35 What is The Resource Curse? (Ressourcenfluch)
Natural Resources and Economic Growth- Transmission Channels Natural Resources x National Income Resources per se may not be the problem! What is X? 36
Oil per se may not be a problem: Iran and Norway total oil rents (US$), average 1971-2008 27.174.706.720 (27 billion dollars) 13.181.361.106 (13 billion dollars) 37 Iran, Islamic Rep. Norway
Oil per se may not be a problem: Iran and Norway 51837450,87 (52 millions) Population, average 1971-2008 4274731,947 (4 millions) Iran Norway 38
Oil per se may not be a problem: Iran and Norway Oil rents per person (US$), average 1971-2008 6 times more oil rents per Norwegian than per Iranian 3005 $ 512 $ Iran Norway 39
Oil per se may not be a problem: Iran and Norway Income per person (adjusated for inflation rate US$), average 1960-2011 (52 years) 37,487 1,699 5,404 40 Iran, Islamic Rep. Norway World
Oil per se may not be a problem: Iran and Norway 60 Annual Inflation rate % 50 40 % 30 20 20.63 41 10 0-10 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Inflation rate, Iran Inflation rate, Norway 1.3
Oil per se may not be a problem: Iran and Norway % School enrollment, tertiary 90 80 70 60 50 40 30 20 10 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Iran Norway World 42
Oil per se may not be a problem: Iran and Norway- Democracy Index 10 5 0 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010-5 43-10 Norway Iran
Natural Resources and Economic Growth- Transmission Channels Message: Oil per se is not the problem! Factor X is guilty! 44
Oil and Democracy in Iran Dependence on oil reduces political openness. Why? No Representation without Taxation! 100 90 80 70 60 50 40 30 20 10 0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 45 Oil Revenues (% Total Revenues) Tax Revenues (% Total Revenues)
Oil and Democracy in Iran Dependence on oil reduces political openness. Why? The Oil state buy political oppositions by increasing subsidies and creating public jobs. Total Number of Government Employees 2,147,195 849,085 46
Oil and Democracy in Iran 47 90 80 70 60 50 40 30 20 10 00 Fossil Fuel Consumption Subsidies in Top 25 Countries, 2010 (Billion US Dollars) Iran Saudi Russia India China Egypt Venezuela UAE Indonesia Uzbekistan Iraq Algeria Mexico Thailand Ukraine Kuwait Pakistan Argentina Malaysia Bangladesh Turkmenistan Kazakhstan Libya Qatar Ecuador Source: Compiled by Earth Policy Institute
And Results 10 8 6 4 2 0-2 -4-6 -8-10 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 polity2_iran Polity2_Israel 48 Higher Polity score means higher democracy
49 Finally we talk about demographic structure
Politics, Economics and Demography! Politics Economics Demography 50
51 Origins of Fertility Change
Fertility Change in Iran and Israel 8 7 6 5 4 3 2 1 1996: 2.9 3 1.636 0 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 Iran, Islamic Rep. Israel 52
Working Age Population in Iran and Israel 75 70 65 2001: 62 60 55 50 45 40 Iran, Islamic Rep. Israel 53
Working Age Population in Iran and Israel Increasing Working Age population can be blessing if the government and economy uses this opportunity: more labor force, if employed prodcutively, can lead to more growth. It can be a curse if economy cannot absorbt them: higher unemployment and political instability. example: Arab Spring 54
What we mean by demographic transition 55 When the baby boom ends, working age population (15-64 years) increases: That is what we call demographic transition!
Vielen Dank! JProf. Dr. Mohammad Reza Farzanegan farzanegan@uni-marburg.de http://www.uni-marburg.de/cnms/wirtschaft https://www.facebook.com/menaecon 56