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Investigating the Effect of Structural Changes and Trade Liberalization on Total Factor Productivity in Iran (1991-2018)

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  • Hokmollahi , Yasaman

    (Faculty of Economics - Alborz Campus, University of Tehran Tehran, Iran)

  • taiebnia , Ali

    (Faculty of Economics, University of Tehran, Tehran, Iran)

  • Souri , Ali

    (Faculty of Economics, University of Tehran, Tehran, Iran)

Abstract

Structural change plays an important role in developing any economy, so understanding it is critical to make policies that increase total factor productivity. The structural change that leads to an efficient resource allocation after trade reforms is desirable; the key factor that can affect the relation of "structural change and trade liberalization" with productivity is the quality of institutions. In this study, we first use the principal component method to propose a multidimensional index for structural change and then apply the ARDL econometrics model to evaluate the effect of trade liberalization and structural changes on total factor productivity in Iran during 1991- 2018. The results show that structural changes increase the total factor productivity, and trade liberalization has a positive and significant effect on total factor productivity in the short term. Our results also indicate that there is no long-run relationship in this period.

Suggested Citation

  • Hokmollahi , Yasaman & taiebnia , Ali & Souri , Ali, 2021. "Investigating the Effect of Structural Changes and Trade Liberalization on Total Factor Productivity in Iran (1991-2018)," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 16(1), pages 71-92, March.
    • Handle: RePEc:mbr:jmonec:v:16:y:2021:i:1:p:71-92
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    More about this item

    Keywords

    Structural change; Trade liberalization; Institutions; Productivity;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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