The Impact of Economic Shocks on Rural Population Growth Rates Across Iranian Provinces

Introduction
In recent decades, many countries have faced declining population growth rates and have implemented various policy measures to reverse this trend. Among the key factors contributing to the decline in population growth are economic variables and the associated macroeconomic instabilities. Economic cycles and their resulting fluctuations significantly affect demographic structures and shift long-term population dynamics. There are multiple mechanisms through which economic conditions influence population trends. These include:

The effects of economic uncertainty (Hofmann & Hohmeyer, 2013),
Job instability and labor market volatility (Modena et al., 2014),
Unemployment among both native and immigrant populations (Tragaki & Bagavos, 2014; Cazzola et al., 2016),
Fluctuations in housing and mortgage markets (Schneider, 2015),
Increased mortality during economic downturns (Lusardi et al., 2015; Stuckler et al., 2015),
Impacts on the labor market (Gil Alonso et al., 2016), and
Indirect influences on fertility, such as delayed marriage (Goldstein et al., 2013) or reduced marriage rates (Kreyenfeld et al., 2012; Lee & Painter, 2013).

Iran, in particular, has experienced prolonged periods of international sanctions over the past few decades. These sanctions have severely constrained the country's primary source of revenue—oil exports—and destabilized its macroeconomic environment. As a result, key economic indicators have undergone significant fluctuations, posing major challenges to the national economy and indirectly affecting population growth patterns.
Despite the critical importance of this issue, there has been limited academic attention, especially at the regional (provincial) level. Most existing studies have focused on national-level population growth, with very few examining the impact of economic shocks on rural population dynamics. Notably, no study to date has investigated how provincial-level rural population growth in Iran responds to economic shocks. Therefore, understanding these relationships is crucial for mitigating the negative consequences and formulating effective policy responses.
 
Methodology
This study aims to investigate the effects of economic shocks on the rural population growth rates across Iranian provinces. Due to data limitations regarding Alborz Province, it was combined with Tehran Province for analytical purposes. To achieve this objective, a Bayesian Panel VAR (Vector Autoregression) model was employed using MATLAB software. The analysis covers the period from 1997 to 2022, allowing sufficient time to capture both short- and long-term impacts of economic shocks on rural demographics.
 
Findings
Among the variables analyzed, household income and economic growth were found to be stationary at the level, whereas other variables became stationary after first differencing. Based on Pedroni’s cointegration test and Kao’s test, a long-term relationship between the selected variables was confirmed. The results indicate that inflation, exchange rate fluctuations, and income inequality (Gini coefficient) have a negative effect on rural population growth rates across provinces. In contrast, economic growth and household income show a positive short-term effect on rural population growth in most provinces. However, over the long term, this effect turns negative, likely due to increased migration from rural to urban areas, which ultimately reduces rural population growth.
These findings were found to be statistically significant across all provinces.
According to the variance decomposition results, after 20 periods:

Inflation rate had the greatest impact on rural population growth (excluding the self-effect of the variable itself),
The Gini coefficient had the least impact in most provinces.
The highest auto-predictive power (self-effect) was observed in Yazd Province (96.84%),
The lowest was in West Azerbaijan Province (59.06%).

For the contribution of each independent variable to rural population growth:

West Azerbaijan: Most affected by inflation,
Tehran: Most affected by economic growth,
Razavi Khorasan: Most affected by the Gini coefficient,
Mazandaran: Most affected by government expenditures,
West Azerbaijan: Also, most affected by exchange rate.

Conversely, Yazd Province showed the lowest response to shocks in all variables, indicating relatively stable rural population dynamics.
 
Discussion and Conclusion
The empirical results underscore the significant role of economic factors in shaping rural population growth trends in Iran. Given the country's limited economic diversification and its susceptibility to external shocks—particularly international sanctions—it is essential to adopt strategic approaches to stabilize key economic indicators. Sanctions have restricted access to foreign currency and triggered severe economic disruptions. These shocks, in turn, have cascading effects on public revenues, leading to adjustments in imports, inflation, foreign exchange reserves, and public expenditures—ultimately influencing demographic outcomes. Therefore, promoting constructive diplomacy and implementing macroeconomic stabilization policies are vital to mitigate the adverse effects of economic shocks and protect vulnerable sectors like rural communities. Additionally, the negative relationship between the Gini coefficient and rural population growth highlights the importance of addressing income inequality. Since agriculture remains a dominant sector in rural economies, policies aimed at improving rural livelihoods can help curb out-migration to urban centers. Future research should consider incorporating spatial heterogeneity more explicitly and explore the non-linear effects of economic shocks on rural demography. A deeper understanding of these dynamics will better inform targeted interventions and sustainable rural development strategies.