Evaluating the Effect of Labor Market Contract Type on Productivity Growth of the Iran's Manufacturing Industries

The purpose of this article is to understand the effect of the type of labor market contract on the productivity growth of total factor productivity (TFP) in Iran's manufacturing industries. For this purpose, while using panel data, in order to avoid the problem of simultaneity in the production function, productivity was measured by Levinsohn and Petrin semi-parametric methods. Then, using the skill intensity index, industries were divided into skilled and unskilled sections. In evaluating the impact of labor market contract type on productivity growth in skilled and unskilled sectors, the effect of two Schumpeterian growth variables on productivity growth of the leadership industry and the productivity gap between each industry and the leadership industry was also estimated. The results indicate that, first, temporary employment (TE) has a negative effect on productivity growth, but is more harmful in the skilled sectors. Second, the positive impact of the relative productivity gap and the productivity growth of the leader industry is consistent with the Schumpeterian growth literature.