Industrial Development Policy and Political Transaction Costs in Iran (1961–1978)

Document Type : Research Paper

Authors

1 PhD student in Political Sociology, Allameh Tabatabaei University, Tehran, Iran.

2 Associate Professor of Political Science, Faculty of Administrative Sciences & Economics, University of Isfahan, Isfahan, Iran.

Abstract
This article investigates the intertwined and complex relationship between political markets and the long-term sustainability of economic growth. Historically, many scholars believed that economic development had little to do with political arrangements. However, contemporary development studies increasingly emphasize the dominance of politics in shaping the rules of the game, drawing significant scholarly attention to political dynamics and their consequences for long-term economic growth. In this context, the present study prioritizes the primacy of politics in economic development and poses the following central question: Despite Iran's initial steps toward development in the 1960s, why did its economic development plans ultimately fail during the Pahlavi era? The hypothesis, grounded in the new institutional economics literature, posits that high political transaction costs during the late years of Mohammad Reza Shah’s rule undermined the long-term success of development plans. We argue that in contrast to the 1960s, the political markets of the 1970s hindered cooperation between state officials and the private sector. Through partial implementation of agreements, asymmetric information, and transformations in mental models, they disrupted the continuity of economic growth. The research methodology is process tracing, and data is collected using documentary methods based on library resources.

Keywords

Subjects


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Volume 20, Issue 3 - Serial Number 79
No. 79
Summer 2025
Pages 7-52

  • Receive Date 25 April 2025
  • Revise Date 28 July 2025
  • Accept Date 17 August 2025