Total Factor Productivity Contributions and Its Drivers: Endogenous Growth Accounting Approach

Document Type : Research Paper

Authors

Department of Economics, Fi.C., Islamic Azad University, Firoozkooh, Iran.

Abstract

This paper applies the endogenous growth accounting Approach to measure total factor productivity (TFP) and its Contributions in 121 four-digit ISIC code manufacturing industries between 2003 and 2019. The basic problem of most researchers is that they use the theory of exogenous growth to account for. This study uses the endogenous growth theory and the induced innovation theory to justify the utilization of varying coefficient production functions and decomposes total factor productivity into two parts: input-embedded and input-free productivities. Input-free productivity is divided into technical efficiency change and technological progress, while input-embedded productivity depends on the inputs used in the production function (labor and capital). Findings show that the average value-added growth is % 6.7%. The average ratio of input-embedded productivity in the industry's growth is about 21.8%. The contribution of capital-embedded productivity is -6.7%, and the contribution of labor-embedded productivity is 28.5%. Therefore, technology is more manifest in labor. The IFP-free productivity ratio is 1.4%, which is due to two factors: technical efficiency change and technological progress.

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References

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Iranian Economic Review
Volume 29, Issue 4
December 2025
Pages 1469-1496

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