A Survey on the Relationship between Labor Productivity and Institutional Quality: A Case Study on Iranian Economy

This article investigates productivity, employing the methodologicalbasis of institutional economy to account for Iranian economy andattributes. In order to find out institutional impediments of improvingproductivity, a conceptual framework is derived based upon Norththeories. Founded on this conceptual framework, institutional barriers toimprove productivity are divided to supply and demand impediments.Determinant of productivity, on the supply side, are transformation andtransaction costs. Institutions determining transaction costs are:institution of property right, risk and uncertainty related institutions,institutions affecting capital mobility, and institutions associated withtransparent flow of information. Indications of quality at theseinstitutions are: the number of worthless issued cheques or the numberof total dossiers, the number of robberies or forcible seizures, thenumber of bank branches, and Internet (telephone or cellphone) usersper 100 population. Capital per capita (physical or human) is used as asubstitute variable for transformation costs. On the demand side, lack ofrequired motivation in people and institutions (public will) and lack ofpolitical will is regarded as an impediment to improve productivity.Due to statistical shortcomings, available evidence of Iranian economydoes not meet our theoretical requirements in this study)

Keywords:

Labor productivity , Institutional economics , Property rights