Decomposition of Total Factor Productivity Growth Sources in Iran

The purpose of this paper is decomposing total factor productivity growth with reconciling both of the input- output and linear programming models in general equilibrium framework rely on the shadow prices of production factors as their real values in an open economy and studying its performance in Iran. For this purpose, input- output tables of central bank of Iran aggregated in 7 sectors are used for years 1367 and 1378. In this research, we decomposed total factor productivity growth to three factors named technical changes, terms of trade effects and efficiency changes which are reached by solving a linear program of maximization of domestic final demand using the framework of Raa and Mohnen (2002) paper. In this regard, the main question is that which of the three factors listed above is the major factor of total factor productivity growth in Iran? Based on the results, technical changes with share of 91 percent were the major factor of total factor productivity growth in Iran in our study period.