Studying of Interaction between Agriculture and Industry Sectors in Iran’s Provinces

Due to the interdependence between agriculture and industry growth understanding the relationship between economic sectors of the country is very necessary for evaluating past economic policies and provision future strategies. Without information about the interaction between economic sectors, understanding appropriate policies to achieve economic growth and sustainable development is impossible. This issue is important enough that in the sixth development plane has been proposed as one of the policies to achieve sustainable and employment economic growth. Therefore, the main approach in this study was based on interaction process between agricultural and industrial sectors as two key sectors in the Iranian economy which is studied over the period 2005-2014 for the 30 provinces of the country and by using GMM method. At first by using the Granger causality test a one-way relationship from agriculture to industry was determined so that the objective was to investigate the impact of agricultural growth on the industry. The results of the estimation model show that there is a significant and positive relationship between the agriculture and industry value added also there is a positive relationship between the share of labor and investment with industry value-added as well. The study finds that by using fully generalized least squares method (FMOLS) there is a significant and positive relationship between the agriculture and industry value added in the long run is confirmed. The results identify the relationship of the transport value added as an intermediate element in the economic sectors with industry value-added is negative and significant. Of course, this relationship in the long term due to investment and access to advanced transportation system should increase the value-added of an industry.