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The Sources of Economic Growth in Iran’s Economy


  • Mehrdad KHADIMEE

    (Department of Economics, Azad University of Iran, Tehran, Iran)


This paper estimates the shares of Total Factor Productivity Growth (TFPG), labor accumulation, and capital stock accumulation in Iran’s economy, and analyzes the time trend of the TFPG over the course of 1360-1392 of the Solar Hijri calendar (approximately equal to the 1981-2013 of the Gregorian calendar). Few studies have already been carried out for estimating sources of economic growth in various countries and different economic sectors. Nevertheless, little attention has been paid to Iran’s economy in recent years. After testing for the stationarity of the variables using Dickey-Fuller tests, this study estimates an aggregate production function for Iran’s economy using times-series econometric methods. The results suggest that the production structure of Iran’s economy is more capital-intensive than being labor-intensive. In fact, the elasticities of production with respect to capital and labor have been 0.59 and 0.41, respectively. The findings show that the average annual growth rate of TFP has roughly been 0.5% over the study time period. The other results imply that the average contributions of TFPG, labor accumulation and capital accumulation in Iran’s economic growth have been 15%, 30%, and 55%, respectively. As a result, it could be inferred that the performance of Iran’s economy in terms of long-run, economy-wide productivity growth has been weak compared to that of other developed and developing countries, in most of which TFPG possesses relatively greater shares in their economic growth.

Suggested Citation

  • Mehrdad KHADIMEE, 2016. "The Sources of Economic Growth in Iran’s Economy," Journal of Economics Library, KSP Journals, vol. 3(4), pages 621-631, December.
  • Handle: RePEc:ksp:journ5:v:3:y:2016:i:4:p:621-631

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    References listed on IDEAS

    1. Mahmood Mahmoudzadeh & Seyyed Ali Zeytoon Nejad Moosavian, 2016. "Measuring and Analyzing the Shares of Economic Growth Sources in the Mining Sector of Iran: A Neoclassical Growth Accounting Approach," Papers 1612.00833,
    2. D. W. Jorgenson & Z. Griliches, 1967. "The Explanation of Productivity Change," Review of Economic Studies, Oxford University Press, vol. 34(3), pages 249-283.
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    6. Alexandra Naumenko & Seyyed Ali Zeytoon Nejad Moosavian, 2016. "Clarifying Theoretical Intricacies through the Use of Conceptual Visualization: Case of Production Theory in Advanced Microeconomics," Applied Economics and Finance, Redfame publishing, vol. 3(4), pages 103-122, November.
    7. Sriram Shankar & B. Bhaskara Rao, 2012. "Estimates of the long-run growth rate of Singapore with a CES production function," Applied Economics Letters, Taylor & Francis Journals, vol. 19(15), pages 1525-1530, October.
    8. Peter Mawson & Kenneth I Carlaw & Nathan McLellan, 2003. "Productivity Measurement: Alternative Approaches and Estimates," Treasury Working Paper Series 03/12, New Zealand Treasury.
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    More about this item


    Iran; Sources of economic growth; Aggregate production function; Capital accumulation; Employment;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence


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