Determinants of Total Factor Productivity in Iranian Manufacturing Industries

The purpose of this paper has been to study the main determinants of productivity in manufacturing industries of Iran. The main emphasize has been on the role of institutions. We have used productivity in two digit manufacturing industries based on ISIC classification as dependent variable, and expenditures on R&D,, Manufactured Exports, Investment on Manufacturing Industries and Square of employment as Firm Size in addition to Institutions for which we have taken the variables such as number of court litigation documents regarding property rights, security and aggression, transparency in law and order and corruption as explanatory variables for the changes in total factor productivity during the Period 1374-1386.The results show that while the coefficients for all other variables were positive and Significant. The coefficients of Institutions were, however negative and statistically significant for all the institutional variables, indicating that institutions in Iran reduces opportunity and incentive for industrial investment and thereby acting as important hindrance factors for the growth of industrial productivity.