Decomposition of labor productivity changes during 2006-2011: The case of Tehran and Rest of Country

Tehran as the most important province of Iran accounts for 26% of GDP, on average. This paper aims to answer this question: What is the most important component of changes in labor productivity in Tehran compared to the rest of country? To answer this question, two symmetric industry by industry input-output tables provided by Research Center of the Parliament in 2006 and Statistical Center of Iran in 2011 are used to compute two-region table of Tehran and rest of country at constant price by applying FLQ-RAS method. Then, according to Ditzenbacher et al(2000) study, the changes in labor productivity are decomposed into five factors including: “Value added coefficient”, “Direct labor requirement”, “Structural change”, “Interregional trade” and “Final demand”. The results show that the effect of change in the number of employees in Tehran is positive, while in the rest of country, this effect has moderated the labor productivity. In addition, the effect of the change in the component of final demand in Tehran is close to zero, while in rest of country, it increases the labor productivity. Furthermore, the other factors under study in Tehran and the rest of country have increased the labor productivity