The Effect of Political Instability on Economic Growth in Iran between Two Revolutions (1907-1979)


Faculty of Economics, University of Allameh Tabataba’i, Tehran, Iran


From the constitutional revolution (1907) to the Islamic revolution (1979), Iranian governments had been fluctuated sharply (longevity of government from 3 days to more than 12 years). This situation was the result of permanent competition between the king, parliament, government, interest groups, and also international political conditions. In this paper, we study the effect of mentioned conditions on economic growth. For this purpose, we define 7 political instability indices and examine the best definition for political instability that was suitable for the Iranian condition in mentioned duration. Using the Solow growth model and OLS approach, we find that when the longevity of government was smaller than four years, or the longevity of two of three sequential governments were smaller than one year, then Iran experienced political instability and it shrinks the economic growth. Finally, we find that when the government was politically stable, and institutional constraints on government by other branches were strong, the Iranian economy experienced positive and reliable economic growth. These conditions had been experienced in three periods of time: 1927-1939, 1955-1960, and 1964-1977. It means that the duration of 1907-1979 can be divided into two major parts: duration of political stability with remarkable economic growth (for three mentioned periods), and duration of political instability with high economic fluctuations or recession.


Abdelkader Hossam Eldin, M. (2017). Political Instability and Economic Growth in Egypt. Review of Middle East Economics and Finance, 13(2), 1-11.
Acemoglu, D. (2009). Introduction to Modern Economic Growth. Princeton and Oxford: Princeton University Press.
Aisen, A., & Francisco, V. (2013). How Does Political Instability Affect Economic Growth? European Journal of Political Economy, 29, 151-167.
Aisen, A., & Veiga, F. J. (2013). How does Political Instability Affect Economic Growth? European Journal of Political Economy, 29(C), 151-167.
Alesina, A., & Tabellini, G. (1989). External Debt, Capital Flight, and Political Risk. Journal of International Economics, 27(3-4), 199-220.
Alesina, A., Ozler, S., Roubini, N., & Swagel, P. (1996). Political Instability and Economic Growth. Journal of Economic Growth, 1, 189-211.
Asgharpour, H., Ahmadian, K., & Maniei, A. (2013). Effect of Political Instability on Iranian Economic Growth; APARCH Non-linear Approach. Quarterly Journal of Economic Research and Policies, 65, 175-194.
Azhand, Y. (1990). Iranian Government from Moshiroddole to Mousavi. Tehran: Administration of Archive, Documents, and Museum of President Office (in Persian).
Barro, R. J., & Sala-i-Martin, X. (2004). Economic Growth. New York: McGraw-Hill.
Barro, R. J. (1994). Democracy and Growth. NBER Working Paper, 4909, Retrieved from
---------- (1990). Economic Growth in a Cross-Section of Countries. Quarterly Journal of Economics, 106, 407-443.
Campos N. F., & Menelaos, G. K. (2007). Growth, Volatility, and Political Instability: Non-Linear Time-Series Evidence for Argentina, 1896-2000. IZA DP, 3087.
Carmignani, F. (2003). Political Instability, Uncertainty, and Economics. Journal of Economic Surveys, 17, 1-54.
Central Bank of Iran. (1993). National Accounts of Iran. Retrieved from
Drazen, A. (2000). Political Economy in Macroeconomics. New Jersey: Princeton University Press.
Gadong Toma, D. (2019). Political instability and economic growth in Africa. International Journal of Economic Policy Studies, 13, 217–257.
Ghura, D., & Benoît, M. (2004). Political Instability and Growth: The Central African Republic. IMF Working Paper, WP/04/80, Retrieved from
Jong-A-Pin, R. (2009). On the Measurement of Political Instability and its Impact on Economic Growth. European Journal of Political Economy, 25(1), 15-29.
Kevin, W. (2017). Foreign Direct Investment, Economic Growth, and Political Instability. Journal of Economic Development, Chung-Ang University, Department of Economics, 42(2), 17-37.
Khavarinajad, A. (2009). The Estimation of Gross Domestic Product of Iran (1906-1935). Central Bank of Iran, Retrieved from
---------- (2002). The Estimation of Gross Domestic Product of Iran (1936-1958). Central Bank of Iran, Retrieved from
Komijani, A., Gorji, E., & Eghbali, A. (2013). Political Economy of Economic Growth. Quarterly Journal of Economic Research and Policies, 65, 61-82.
Muhammad Jalib, S., & Fazale, W. (2019). Debt and Economic Growth of Pakistan; Role of Uncertain Economic and Political Conditions. Business & Economic Review, Institute of Management Sciences, 11(2), 83-106.
Pooja, K., & Michael, A. Q. (2019). Political Instability, Ethnic Fractionalization, and Economic Growth. International Economics and Economic Policy, 16(2), 435-461.