Abbas Aminifard - Islamic Azad University, Shiraz Branch , IRAN
Sara Estedlal - Master of Economics

Productivity is often computed by approximating the weighted sum of the inputs from the estimationof the Cobb-Douglas production function. Such estimates, however, may suffer from simultaneity andselection biases. Olley and Pakes (1996) introduced a semi-parametric method which allows us toestimate the production function parameters consistently and thus obtain reliable productivity measures by controlling for such biases. This study first reviews this method and then introduces a Stata(10) command to implement it for manufacturing industry in IRAN. The results show that material, skill labor and capital have important role in production function and this is increasing return to scale (IRS) by estimation of Olley and Pakes approach versus decreasing return to scale (DRS) by fixed effect. After estimation of production and calculated total factor productivity (TFP), we concluded that the effect of export and exit rate on TFP at manufacturing industry (ISIC 4digits) in IRAN not very considerable with compare to import penetration coefficient and year effect.

Simultaneity and production functions; Firm Dynamics; Productivity; Iranian manufacturing industry JEL classification: F13; D24; C23