Modeling the Policy Leverage Index for Realizing Distributive Justice and Resilience in Iran’s Economy: A Structural-Network Analysis Approach

Extended Abstract
 
Introduction and Objectives: In recent decades, Iran’s economy has experienced “structural divergence,” a condition where the sectors driving economic growth (often capital-intensive) do not necessarily generate employment or ensure equitable income distribution. This gap has created a fundamental policy conflict among growth, justice, and resilience objectives. High-level policy documents, particularly the “General Policies of Resistance Economy,” emphasize achieving an economy that is simultaneously endogenous, extroverted, and justice-based. However, traditional structural analysis methods, such as classical Input-Output (I-O) models, have primarily focused on identifying key sectors based on production volume, often neglecting critical components like income distribution, employment, and network resilience. Aiming to fill this theoretical and policy gap, this study seeks to determine how investment priorities can be established by integrating conflicting growth and justice goals. The primary objective is to design an integrated tool titled the “Policy Leverage Index (PLI)” and develop an “Importance-Vulnerability Matrix.” These tools attempt to move beyond one-dimensional prioritization to identify sectors that simultaneously act as growth engines, equitable income distributors, and resilient nodes against exchange rate shocks, thereby paving the way toward the Islamic-Iranian pattern of progress.
Method: This research is applied in purpose and quantitative in nature, based on Input-Output analysis. The primary data include the 74-sector Input-Output table for the year 1400 (2021-2022) from the Central Bank of Iran, along with employment and national accounts statistics. The analysis was conducted in four steps: (1) imputation of employment and compensation data to align with the 74-sector table; (2) calculation of traditional production, employment, and income multipliers using the Leontief inverse matrix; (3) measurement of network indices (backward and forward linkages) and calculation of the “Intermediate Import Dependency Coefficient” to assess exchange rate vulnerability; and (4) design of the composite “Policy Leverage Index (PLI).” The PLI was constructed by weighting four key components based on the goals of the 7th Development Plan: Production Multiplier (35%), Employment Multiplier (35%), Income Multiplier (15%), and Network Score (15%). This weighting is rooted in Islamic economic principles (emphasizing labor and distributive justice) and legal requirements. Additionally, for resilience analysis, an “Importance-Vulnerability Matrix” was developed, classifying sectors into four quadrants: “Resilient National Drivers,” “Vulnerable Strategic Drivers,” “Currency Traps,” and “Passive Sectors.”
Results: The findings reveal a significant gap between growth drivers and justice-oriented drivers. Based on the PLI, the “Other Support Activities” sector ranked first with a score of 0.493, primarily due to its exceptionally high employment multiplier (6.64). However, “Motor Vehicle Manufacturing” (Rank 2) and “Public Construction” (Rank 3) showed a better balance between growth and employment (see Table 1). Vulnerability analysis indicated that industrial growth engines like the automotive industry have high import dependency (16.3%) and fall into the “Vulnerable” zone. In contrast, “Public Construction” and “Basic Metals,” with negligible import dependency and extensive backward linkages, were identified as “Resilient National Drivers.” These sectors exemplify an endogenous economy that can act as a driver for exiting recession and distributing income without creating pressure on foreign exchange reserves.
Table 1: Final Ranking of Sectors Based on Policy Leverage Index (PLI) - Balanced Scenario




Rank


Sector Title


Final PLI Score


Production Multiplier


Employment Multiplier


Income Multiplier


Network Score




1


Other Support Activities


0.493


1.534


6.642


0.189


0.089




2


Manufacture of Motor Vehicles, Trailers and Semi-Trailers


0.443


2.942


0.334


0.219


0.209




3


Public Construction


0.434


2.502


0.578


0.417


0.306




4


Water Collection, Treatment and Supply


0.432


2.261


1.811


0.369


0.222




5


Passenger Rail Transport


0.378


2.394


0.577


0.265


0.296




6


Manufacture of Leather and Related Products


0.367


2.368


0.268


0.177


0.497




7


Manufacture of Electrical Equipment


0.364


2.447


0.294


0.190


0.351




8


Private Construction


0.364


2.175


0.535


0.384


0.308




9


Manufacture of Paper and Paper Products


0.363


2.432


0.302


0.192


0.353




10


Manufacture of Food Products


0.350


2.216


0.356


0.174


0.541




11


Manufacture of Textiles


0.349


2.383


0.306


0.189


0.326




12


Manufacture of Other Transport Equipment


0.348


2.488


0.306


0.190


0.190




13


Manufacture of Rubber and Plastic Products


0.347


2.397


0.293


0.191


0.299




14


Manufacture of Fabricated Metal Products...


0.343


2.354


0.294


0.185


0.330




15


Manufacture of Beverages


0.338


2.245


0.288


0.173


0.455




 
Source: Author’s calculations based on consolidated data from the Central Bank of Iran and the Statistical Center of Iran (2021).
Discussion and Conclusions: The results confirm structural divergence in the Iranian economy, indicating that relying solely on growth-oriented policies cannot achieve justice and resilience goals. The Importance-Vulnerability Matrix (Figure 1) demonstrated that sectors like the automotive industry, despite their high importance for growth, are considered the economy’s Achilles’ heel regarding the principle of “Nafi Sabil” (denial of dominance) and economic independence due to their high import dependence. Conversely, sectors like public construction and infrastructure are most aligned with Resistance Economy policies. Policy implications include three main axes: (1) shifting the construction budget trajectory toward “Resilient National Drivers” (such as infrastructure), which are both job-creating and low in foreign exchange intensity; (2) conditioning support for the automotive industry on “Deepening Domestic Manufacturing” to exit the vulnerable zone; and (3) paying special attention to knowledge-based service sectors (e.g., education and health), which have high income multipliers and can guarantee distributive justice. This framework allows policymakers to allocate resources based not only on efficiency but also on Public Interest” (Maslahat) and structural sustainability.”
Figure 1: Strategic Importance-Vulnerability Matrix
Source: Author’s calculations
Acknowledgement: The authors would like to express their sincere gratitude to the “Ghadr Applied Economic-Social Research Center” for its scientific support and for providing the necessary facilities to conduct this research. Undoubtedly, a significant part of this study’s achievements is due to the collaboration and support of this esteemed center.
Conflict of Interest: The authors declare that there is no conflict of interest regarding the conduct of this research and the publication of its results.