Industrial Structure and Labour Productivity Evidences from Manufacturing Industry in Iran
Volume 11, Issue 41, Summer 2011, Pages 71-95
Mohammadali Feizpour, Mohammadreza Dehghanpour
Abstract The relationship between industrial structure and productivity, particularly when the former influences the latter, is the traditional view that large firms in more concentrated industries have the resources to make R&D investments, bring about technical advances and ultimately raise industrial productivity. On the other hand, small firms in competitive industries may lack the resources to invest in innovation and make productivity gains. The purpose of this paper is to investigate the relationship between industrial structure and labour productivity for manufacturing firms in Iran during the years of the Second Development Plan. Concentration ratio, barriers to entry and minimum efficient scale are considered as measures of industrial structure and labour productivity wich is defined as the ratio of total output to total labour force. The data for empirical analysis consist of 12000 manufacturing firms, aggregated at 23, 60 and 135 of 2, 3 and 4-digit industries respectively. The results suggest that industry structure, measured by minimum efficient scale has a positive and significant effect in the labour productivity. This finding suggests that Iranian manufacturing plants are sub-optimal and it is possible to increase labour productivity by achieving minimum efficient scale.