Social environment and industrial clusters: the effects on public investment distribution

Using balance sheet data from a sample of 6,996 public firms in the manufacturing industry, we analyse the distribution of public investments in Iran at a very detailed geographical level, i.e., the provincial level, a region which comprises an urban area and the limited geographical area surrounding it. In this paper, we test the impact that unplanned economies and social capital have on the distribution of public investments. While the findings regarding the social variables are mixed, the important role played by unplanned economies is confirmed. Our analysis shows that investments by people are attracted by those areas that combine industrial cluster characteristics with an unplanned economy.