the Study of Long-run Relationship between Production Factors and Value Added in Agricultural Sector Using Cointegration Approach

One of the important factors that its ignorance in the production function can make serious bias in the estimation of function parameters is that of energy. In present study, involving the important factor of energy in the production function of agricultural sector has prohibited bias in estimations and also it has made possible the analysis of this factor in the production of agricultural sector. In this study, first to adjust existent data to the definition of production function and to avoid the bias of coefficients, the potential production has been estimated using a synthetic method that is in fact the mixture of two methods of "Actual Production Trend" and "Modified Trend Through Peaks" and has been involved to the model as dependent variable instead of the actual production. Then, to estimate production function and also to avoid spurious regression, Auto Regressive Distributed Lag (ARDL) method has been used in the framework of the functional form of Cobb-Douglas due to the advantage of this approach in comparison with alternative methods. The results of the estimation of model coefficients indicate the significant and positive effect of all factors including energy on the potential value added of agricultural sector over study period (1967-2004); in such a way that the long-run coefficients have been estimated for labor, capital, and energy, 0.34, 0.15, and 0.48 respectively, and also short-run coefficients for mentioned factors have been estimated 0.035, 0.047, and 0.015 respectively. Also the values of standardized coefficients for mentioned factors have been 0.034, 0.17, and 0.83 respectively, which reveal the high relative importance of energy factor compared to the other factors. Also the comparison of short-run with long-run coefficients shows that although the effect of factors including energy on production has been considerable in long-run, but the efficacy on production has been trifle in short-run.