Study of Agricultural Sector in the Iranian Economy: Revisiting the Role of Agriculture as a Leading Sector

After the Islamic Revolution, agriculture development has been given a priority in the process of economic development. In the first Economic Development Plans )EDP(, the self sufficiency in agricultural highlighted as an important objective. The Second EDP, agricultural sector was considered to be a key sector in the process of economic development. However, there is no such a clear statement about agricultural sector. The shift in the sectoral development policy raises the question that whether agricultural sector does not have the potential to be a key sector in Iranian economy. Accordingly, our focus in this study is to investigate the role of agricultural sector in the economy of Iran and to address the above mentioned question. To this end, Rasmussen’s dispersion and variation indices are used to measure backward linkage effects, based on the inverse matrix. For identification of the forward linkage effects, the concept of “output-inverse” has also been applied. The sectors are then ranked to identify the key sectors. To analyze the changes in the role of agriculture, four input-output tables developed for Iran’s economy are utilized (1973, 1986, 1991 and 2001). Although the results support the importance of the agricultural sector in stimulating the economic growth of Iran through both the backward and forward linkage effects, it also shows that the manufacturing sector has higher potential to increase domestic production through inter-sectoral linkage effects. Based on this results one can conclude that the role of agriculture shall not be underestimated in the process of economic development, as it serves as one of the two key sectors in Iran. However, because of the stronger inter-sectoral linkages, the manufacturing sector has more potential to play a role in the overall growth of the Iranian economy. Due to the strong backward linkages, development of agricultural industries and food processing could be accelerated agricultural development and growth.