Measurement and Analysis of Total Factor Productivity by the Tornqvist Index (Case Study: Textile Production in Iran)

In this modern world, considering expansion of competition and lack of resources, everybody knows the importance of measuring of productivity and decomposition of it. Although assigned about 2.8% of value added and 8.5% of employment of large manufacturing industries, the textile industry has not respected more attention. The main goal of this paper is measuring and analyzing of individual and total factor productivity in textile manufacturing industries during period of 1994-2007. For this purpose, after extraction of production factors (labor, capital stock, material and energy), it is measured individual productivity indexes in form of quotient of value added and each of production factors. It is also computed total factor productivity via divisia index and Tornqvist function. The results show that labor productivity has grown annually 4.4% because of labor decrease especially in large firms. However capital productivity has decreased less in the studying period. On the other hand, productivity of electricity consumption and material has decreased annually 1.7% and 1.9% respectively. Total factor productivity index has grown annually 0.6% in average and this improvement mainly has achieved via labor productivity. The econometric model for decomposition of total factor productivity in the textile manufacturing industries has confirmed the positive impacts of production values, per capita wages, percentage of small firms and government expenditures. It has also confirmed the negative impacts of foreign material dependency and working only in expert field.