Assessing the Virtual Space Impact on Productivity & Efficiency of National Product in Iran

In recent decades, increasing role of productivity contribution in economic growth has been highly emphasized, especially in developing countries such as Iran which are facing low rate of productivity and resource scarcity. In this context one of the main influencing factors on productivity and efficiency is information and communication technology (ICT) known virtual space. Global experiences imply that virtual space could be able to stimulate job creation and value added creation. This is the main theme of this paper.

We apply parametric (Panel Data) & non-parametric (DEA) approach through provincial data. We manage it to understand not only the average effect of virtual space on national product (known as productivity) but the relative position of each province in terms of virtual space contribution in national product, in favor of efficiency.

The findings imply that virtual space, as a production input, could stimulate national product positively, although its impact has been much smaller that other production input (Capital & Labor force). Meanwhile it had significant impact on relative production efficiency in provincial level as well. However by ignoring virtual space in our basic model, the provinces efficiencies decrease by 8.6%. These results shed light on stimulating effect of virtual space on national product.

Increasing cyber space penetration rate, reducing the ICT gap between the provinces, coincided by decreasing access cost of economic agents can be considered as proper policy recommendations.