Identifying the Effect of Research and Development on Total factor Productivity of Iranian´s Manufacturing Sector: 2001-2007

Abstract

This paper is to investigate the effect of research and development on total factor productivity at the level of manufacturing sector of Iran during 2001-2007. We have used translog production function. The result indicate that research and development has a positive and insignificant impact on productivity. We find that the production function is not a cob-douglas one and also the return of scale in manufacturing sector of Iran is increasing. This insignificant relationship can be explained by the gap of R&D expenditure ratio between Iran and other countries. According to the little R&D expenditure impact on productivity in manufacturing sector, Policymakers must pay more attention on R&D activities in Iran.

Keywords: Research and Development, Total Factor Productivity, Manufacturing sector, Panel Data, Translog production function