Production Function of the Mining Sector of Iran

Abstract

The  purpose of this study is to estimate the production function and the structure of production in the mining sector of Iran. Several studies have been conducted in the field of estimating production functions of various economic sectors; however, less attention has been paid to the mining sector. By validating variables using augmented Dickey-Fuller and Phillips-Perron tests, this study estimated the production function under different scenarios using co-integration method and time series data for 1976-2006.The unconstrained Cobb-Douglas function in Tinbergen scenario provided better results in accordance with theoretical foundations of economics, statistics and econometrics. Results show that the structure of mining sector of Iran is capital-intensive and work-intensive. Based on findings, the production elasticity of capital and labour are0.44 and 0.41, respectively. On the other hand, the coefficient of time variable, as an indicator of changes and technological developments in production, is significant representing a positive effect of technical changes on the output of the mining sector.