Although economic growth is not the only determinant criterion in economic development, its role is more important than that of other criteria. Because of the limited resources in the country, enhancement of factor productivity is an indispensable issue. The objective in this study is to examine the changes in factor productivity in Iran economic sectors during 1978-2002 while using the Malmquist productivity index. The Granger causality test is employed to investigate the relationship between investment and productivity changes. Results of the study indicate that the estimated Malmquist productivity index in the agricultural sector is 1.019, revealing the fact that because of improvement in management efficiency, total factor productivity has increased. Based on causality test, an increase in changes in investment, results in growth of factor productivity in the sector.
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