Investigation of Return to Scale and Technical Change of Iran's Manufacturing Sub-sectors

It is the purpose of this paper to evaluate and compare the return to scale and technical change of manufacturing sector subsections of Iran. Therefore, Diewert-Fox model and Törnqvist index and the data of 23 selected manufacturing industrial sectors during 1997-2010 are used. The results show that most of the selected sectors have increasing returns to scale and based on these results, there is potential of efficiency improvements in manufacturing industries. Furthermore, most of these industries experience significant technical change which implies that the growth of manufacturing industries has been driven by both increasing returns to scale and technical progress.