Effect of Human Capital and Technology on the Total Factor Productivity Growth of Iran's Commerce Sector

The main purpose of this paper is to shed light on the productivity effects of human capital and technology in Iran's commerce sector. To this end, firstly some literature references are briefly described together with the effective factor of the economy focusing on the commerce sector. Thereafter, empirical models are specified and estimated using the data over the period 1959 – 2004.
The total factor productivity growth is calculated by estimating Cobb-Douglas Production function assumes constant returns to scale, while factor shares are used as a proxy for output elasticity’s. In the production function, the dependent variable denotes the added commerce value and the explanatory variables include capital and labor force in the sector.
The findings of this paper indicate that human capital and technology substantially increase total factor productivity growth in Iran's commerce sector. So, the flow from human capital and technology is by far the two most important determinants of commerce sector productivity growth. Human capital facilitates the realization of productivity growth in the sector. This paper has also found a significant and substantial negative relationship between inflation and total factor productivity growth in commerce sector. Thus, inflation substantially reduces the rate of productivity growth.