Effects of Government Expenditures onTotal Factor Productivity Growth in Rural Areas of Iran

In this study it is attempted to investigate the effects of government spending on total factor productivity growth in rural areas of Iran. Using time series data of 1971-2001, a system of equations including some of the variables affecting productivity growth was considered. The system of equations included total factor productivity, irrigation, roads and education. Using the simultaneity and diagonolity tests the results showed the three stage least square method (3SLS) to be the more suitable. one Marginal effects of government spending on total factor productivity were calculated. Based on the obtained results, government spending on irrigation is indicetad to have the largest impact on total factor productivity growth. Also, government spending on agricultural research and development has positive impact on total factor productivity growth