The Role of Human Capital and R&D in Total Factor Productivity in the Mining Sector

Promoting Total Factor Productivity (TFP) is one of the methods to improve the competitiveness in the mining sector. Even so, it is of great importance to find a practical solution for productivity improvement. In this study, value added was measured by an innovative method based on the Divisia quantity index for seven mineral activities for the period 1994-2016. The results of calculating TFP by Tornquist approximation of Divisia index show that the annual average of TFP growth was 2.6% over the period; Also, 29.2% of total value added growth stems from TFP growth. The highest share of TFP growth in increasing value added pertains to coal mining activity with 33.6%, and the growth of the production of mineral chemicals activity has been achieved only through increased usage of resources. Subsequently, the impact rate of human capital and R&D on TFP growth was measured by using the method of generalized method of moments (GMM) for panel data. The results of the estimation model by panel data method indicate that the graduated employees as representatives of human capital, R&D capital, and mining activity scale have a positive and significant effect on the TFP. However, R&D capital and human capital have minimum impact on TFP growth.