The Role of Agricultural Sector Productivity in Economic Growth: The Case of Iran's Economic Development Plan

TL;DR

This paper analyzes the contribution of agricultural productivity to Iran's economic growth using the Solow residual model, revealing negative productivity growth and emphasizing the need for productivity management to meet future development targets.

Contribution

It provides an empirical evaluation of agricultural productivity growth in Iran using the Solow residual model over 1991-2010, highlighting the sector's low productivity and future policy recommendations.

Findings

Average total factor productivity growth was -0.72% (1991-2010)

Share of productivity in value-added growth was -19.6%

Forecasted productivity contribution in the fourth plan is 33.8%

Abstract

This study provides the theoretical framework and empirical model for productivity growth evaluations in agricultural sector as one of the most important sectors in Iran's economic development plan. We use the Solow residual model to measure the productivity growth share in the value-added growth of the agricultural sector. Our time series data includes value-added per worker, employment, and capital in this sector. The results show that the average total factor productivity growth rate in the agricultural sector is -0.72% during 1991-2010. Also, during this period, the share of total factor productivity growth in the value-added growth is -19.6%, while it has been forecasted to be 33.8% in the fourth development plan. Considering the effective role of capital in the agricultural low productivity, we suggest applying productivity management plans (especially in regards of capital productivity) to achieve future growth goals.