Decomposition of the Total factor productivity Growth in Manufacturing Industries in Iran's Provinces: Exponential True Fixed Effects Stochastic Frontier Approach

The purpose of this article is to evaluate the trend and the factors that determining the growth of the total factor productivity (TFP) in the manufacturing industries in the provinces of Iran using a stochastic frontier approach in the period of 2011-2019. First, the stochastic frontier translog production function was estimated by the exponential true fixed effects (ETFE) method. Second, the TFP components were measured includes technical progress, technical efficiency changes and scale efficiency. The results show that the average TFP growth of provinces manufacturing industries was 31.1% annually, which technical progress and technical efficiency changes decline and scale effects improve the TFP. In the study period at first the total factor productivity growth increases in 2012 and 2013 and then decreases in 2014 and 2015. In the years 2016 to 2019, the growth of TFP has increased again. The technical progress has had a negative growth in all years, but its trend has been accompanied by improvement in the study period. Among the provinces, Ardebil, Kurdistan and Hormozgan experienced the highest TFP growth and Tehran, Sistan and Baluchistan and Mazandaran experienced the lowest TFP growth. According to the findings, manufacturing industries need to use advanced technologies along with re-allocation of resources.