Journal of Economic Modeling Research

The current study is an attempt to estimate markup and return to scale of 19 two-digit ISIC manufacturing industries of Iran, simultaneously, in accordance to Solow Residual and Structural approach, during the period 1995-2007. Based on Solow Residual approach, the neoclassical assumption of constant return to scale is approved within 95% of manufacturing industries; however in 84% of industries the price was higher than marginal cost significantly. Based on structural approach, 53% of manufacturing industries of Iran are experiencing increasing return to scale significantly; however, in 79% of industries, the price is higher than marginal cost. According to the criteria share of the cost of inputs in income as a theoretic criteria for return to scale-markup ratio, in 53% of cases, structural approach estimates this ratio closer to the reality.

The aim of this paper is decomposition of total factor productivity (TFP) growth to four factors technological progress, technical efficiency, allocative efficiency, scale effects in 21 manufacturing industries, using a panel data technique, during 2000-2011.Findings show that the production elasticity related to labor and capital is o.57 and 0.13, respectively and economy of scale is less than unit. Also, results indicate that productivity growth is positive only in 8 industries that include electronics, communications, paper, medical and optical industries. The decomposition reveals that, TP has been the main driving force of productivity growth- especially in chemical, non-metal mineral, primary metal, motor vehicles, trailers and semi-trailers- while negative efficiency changes, allocative efficiency and scales effects observed in certain industries have contributed to reduce average productivity growth.