Total Factor Productivity Growth Estimation in the Manufacturing Industries of Iran's provinces: A comparison of parametric, non-parametric and semi-parametric approaches

Document Type : Scientific paper

Authors

1 islamic azad uni firoozkuh

2 Department of Economic, Firoozkooh Branch, Islamic Azad University, Firoozkooh, Iran

3 Associate Professor at IAU

4 Assistant Professor, Department of Economics, Firoozkooh Branch, Islamic Azad University, Firoozkooh, Iran

10.22080/mrl.2025.27854.2119

Abstract

Correct estimation of total factor productivity (TFP) is a fundamental issue in applied economics. Along with the approaches of instrumental variables and fixed effects, the control function approach is the most used in estimating the production function and TFP. The purpose of this article is to estimate the TFP growth in the manufacturing industries of Iran's provinces in the period of 2011-2021. For this purpose, three parametric (conventional panel data), non-parametric (Malmquist productivity index) and semi-parametric (control function) approaches were used to estimate the production function and TFP growth. The estimations of the article showed that the efficiency of the capital stock coefficient in the OP algorithm is more than other algorithms, while in the LP algorithm the labor efficiency is higher. Also, the results in the WR method have lower standard error coefficients, which means more efficiency. By controlling the endogeneity of the capital stock in the ACF algorithm, the efficiency of the coefficients increased compared to other estimations. The findings of TFP growth estimation showed that in semi-parametric approaches, average TFP growth is higher than parametric methods which TFP growth was negative in 5 provinces. Estimating the effect of TFP growth drivers with fixed effects (FE) and fully modified ordinary least squares (FMOLS) methods showed that R&D have a positive and significant effect and production structure has a negative and significant effect on the manufacturing industries TFP in Iran's provinces, and the skilled labor doesn’t have a significant effect on TFP. According to the results, the accurate estimation of TFP requires the use of new methods, considering the behavior and decision-making of the company, as well as determining the type of market structure of the companies.

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History

  • Receive Date: 14 October 2024
  • Revise Date: 24 November 2024
  • Accept Date: 31 December 2024

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