The Effects of Good Governance and Financial Reforms on Total Factor Productivity in Iran's Industry and Mining Sector

This study aims to determine the effect of good governance indicators (voice and accountability, political stability without violent, government effectiveness, regulatory quality, rule of law and control of corruption) and financial reforms (financial liberalization and financial development) on the total factor productivity in Iran's industry and mining sector from 1996 through 2018.

In this study, the econometric technique of Auto-Regressive Distributed Lag (ARDL) is used to estimate the effects of variables.

The results of estimates indicate that the effect of all indicators of financial reform on total factor productivity is positive in short term and long term.  In terms of good governance indicators, we see a positive relationship with variables of government effectiveness and regulatory quality, and a negative relationship with corruption control variables. Also, the effect of variables of voice and accountability and the rule of law are negative in short term and are positive in long term. Political stability without violent also has no effect on total factor productivity.

Since financial indicators and good governance have not reached ideal levels in Iran, and we are still witnessing significant fluctuations in this area, the trend of productivity components in industry and mining has not been very significant. Therefore, failure to improve and expand these indicators can have irreparable consequences for the trend of productivity of industry and mining sector and it seems necessary to provide the grounds for further strengthening and expanding the indicators of financial reform and good governance to improve the productivity of the industry and mining sector.