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Sources of economic growth and stagnation in Iran

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  • Farshid Mojaver
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    Abstract

    There is more than a 10 percentage point difference in the economic performance of Iran in roughly the two decades before and after the Islamic revolution in 1979. This paper aims to explain the difference. A standard measure of Total Factor Productivity (TFP) calculated at the aggregate level shows that over one-third of the difference in economic performance can be explained by the change in TFP growth rates in the two periods. The question is further pursued at the manufacturing level. A time-series cross sectional analysis of the manufacturing sector confirms that TFP growth rates fell after the revolution and did not recover anywhere close to their pre revolution levels even after the Iran-Iraq war. The regression analyses show that decreasing returns to scale and mark-up pricing behavior have developed in the manufacturing sector under the Islamic Republic. A Tornqvist measure of TFP, corrected for market imperfections and non-constant returns to scale technology, is used to explain sources of productivity slowdown. The results show that manufacturing TFP increases with (i) private participation rate in economic activities and (ii) exports. Manufacturing TFP falls with (iii) increase in capital-intensity and (iv) higher entry/exit barriers.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/09638190902916519
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    Bibliographic Info

    Article provided by Taylor and Francis Journals in its journal The Journal of International Trade & Economic Development.

    Volume (Year): 18 (2009)
    Issue (Month): 2 ()
    Pages: 275-295

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    Handle: RePEc:taf:jitecd:v:18:y:2009:i:2:p:275-295

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    Related research

    Keywords: TFP growth; institutional change; manufacturing; returns to scale; imperfect competition;

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    Cited by:
    1. Hadi Salehi Esfahani & Kamiar Mohaddes & M. Hashem Pesaran, 2010. "Oil Exports and the Iranian Economy," Working Papers 534, Economic Research Forum, revised Jul 2010.

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