The impact of Total Factor Productivity Growth on Industrial Employment level (case study: Iran)

Productivity growth is playing the main role for economics and some believe that underdevelopment is due to low productivity. The productivity growth is a solution to overcome the production problem and capital constraints and that is why it is highlighted in Iranian economy. The purpose of this paper is to study the productivity growth of all factors of production and employment in industry sector from labor demand point of view. We worked with a system of simultaneous equations and used the two least squares method. It has been focused on annual data, and the two-digit codes of International Standard Industrial Classification of All Economic Activities for the three equations of employment, wages and capital stock during 2008-2016. The results showed that there is no relationship between productivity growth and the level of employment and capital stock in the industrial sector. In addition, there is an opposite relation between productivity growth and the level of wages.