Industrial Productivity Estimation and Mapping (A Case Study of Iran’s Economy)

Recent empirical evidence underscores the vital role of industrial development in fostering structural change and promoting a country's long-run development objectives. Devising sound industrial policy institutions emerges as a key policy option to promote the reallocation of human, physical and financial resources to high value added sectors of the economy (Mbate, 2016). The total factor productivity (TFP) and partial factor productivity (PFP) are the prominent indices for the analysis of industrial development in countries or regions. This study addresses industrial productivity by using these indices. Furthermore, after these indices were estimated, the studied provinces were classified as high-productivity, medium-productivity, low-productivity, and poor-productivity groups through hierarchical clustering. The dispersion rates of all the TFP and PFPs were then shown on a geographical map of Iran. Before the productivity indices are estimated, theoretical and empirical foundations are first reviewed in the following section.