The contribution of various capital forms to sectoral growth: With emphasis on agriculture

Economy subsectors exhibit considerable variation in terms of production factors, technology, and growth rate, resulting in diverse growth patterns. This study investigates how each type of capital, such as physical, human, social, and environmental, affects the growth of subsectors. Employing the Solow Growth Model and utilizing data from ۱۹۷۰ to ۲۰۲۳, this study examines the distinct dynamics of individual sectors and measures labor productivity (technology) through the Solow residual method. The findings indicate that the production elasticity with respect to physical capital is estimated to be approximately ۰.۱۱-۰.۱۳ for the agricultural sector, whereas the corresponding figures for manufacturing and services range from ۰.۲۰ to ۰.۲۲. In contrast, the contribution of human capital, in terms of the elasticity values, is generally below ۰.۰۵, and the impact of social and environmental capital is deemed negligible. Productivity growth accounts for ۲.۴% of the overall agricultural output growth which stands at ۳.۳%. The corresponding figures for services (manufacturing) are ۲.۴% (۰.۷%) and ۴.۵% (۲.۸%), respectively. While labor growth does not contribute to agricultural output growth, the output contribution of labor for manufacturing and services are ۱.۱ and ۱.۳%, respectively. The contribution of physical capital to the aforementioned output growth is approximately ۰.۵۵-۰.۶۵%. The time path of “per capita output” for manufacturing is significantly lower than that of the agricultural and services sectors. Given the importance of technology and productivity in driving output growth, it is advisable to shift towards a market-oriented economy, particularly to facilitate access to international markets.

Keywords:

Agriculture , Environmental capital , Human capital , Productivity growth , social capital , Solow model