Decomposing Total Factor Productivity Growth in Iran's Industrial Sector: An Econometric Approach

Productivity plays a significant and effective role in production growth and enhancement of competitiveness. The degree of performance of different economic sectors in using productive resource can be studied through measurement and analysis of productivity. In this paper, we have surveyd the sources of total factor productivity (TFP) growth in Iran’s industrial sector for the period of 1350-1385 by using an econometric approach. Using the Seemingly Unrelated Regression Equation (SURE) approach, we have initially estimated a Translog Cost Function and a system of cost share equations. Then, based on the estimation results of the above models, we have decomposed total factor productivity growth rate into the contributions of technological change and economies of scale. The results show that the share of technological change in productivity growth is greater than that of scale economies.