Total Factor Productivity and Analysis of the Effect of Government Fiscal Policy Instruments

Document Type : Research Paper

Authors

1 Associate Professor, Department of Energy Economics, Faculty of Economics and Administration Sciences, Mazandaran University, Babolsar, Iran

2 Associate Professor, Department of Economics, Faculty of Economics, Mazandaran University, Babolsar, Iran

3 M.Sc. Student, Department of Economics, Faculty of Economics, Mazandaran University, Babolsar, Iran

10.22051/ieda.2024.44992.1371

Abstract

In this research, the asymmetric effects of the government's fiscal instruments on the total factor productivity in Iran has been analyzed. So, at first, the total factor productivity index is calculated using the Solow balance method. Then, in order to investigate and empirically analyze the effect of government fiscal instruments on the total factor productivity, the linear (symmetric) and non-linear (asymmetric) autoregressive distributed lag method has been used. The findings in a linear (symmetrical) model show that the government size and the tax burden have a negative effect on the productivity. The non-linear (asymmetric) estimate also shows the asymmetric and negative effect of government size and tax burden on the productivity. In such a way that the negative effect of increases in the government size on the productivity is more than three times the negative effect of decreases in the government size. The tax burden is also associated with an asymmetric effect and its negative effect size during reductions on productivity is almost twice as much as its negative effect during increases. Inflation in a linear form is not associated with a significant effect, but in a non-linear form, it has an inverse and asymmetric effect on the productivity. In such a way that the favorable effect of reductions in inflation on the total productivity is more than the unfavorable effect of increases in inflation. The degree of openness in both symmetric and asymmetric models has a direct effect with the productivity as expected, and according to the estimate, the asymmetry of the effect was also confirmed for this factor. In such a way that the favorable effect of increases in the degree of openness on the productivity is more than four times the unfavorable effect of decreases in the degree of openness. Based on the results, it is suggested that the policy makers should pay attention to the asymmetry of the aforementioned factors in influencing the productivity while adopting appropriate policies in order to improve the productivity of the production factors

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References

 
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