A Study of Contemporaneous Effect of Foreign Direct Investment and Urbanization on Economic Growth in Iranian Provinces (2006-2015)

The main goal of every development plan is to achieve economic growth and mass production with considerations for the needs of economy and optimal utilization of resources and capital in the society. Urbanization is one of the most important aspects of the modern society, which embodies significant factors that can lead to economic growth. Urbanization is the relationship between population, employment, migration, physical construction and human environment, and its development at any time and in any geographical area is influenced by national and international conditions. Today, the effect of foreign direct investment on economic growth has been confirmed by theories and empirical evidence. This study examines the contemporaneous effects of urbanization and foreign direct investment on economic growth in Iranian provinces over period 2006-2015 by using Generalized Moment Method (GMM). Our results show that foreign direct investment, government size, capital stock and human capital index have a positive impact on economic growth in Iranian provinces. However, the effect of urbanization intensity on economic growth has been found to be negative.