Analysis the Impact of Technology Spillovers on Total Factor Productivity of Agricultural Sector in Iran

اقتصاد و توسعه کشاورزی

Article 2, Volume 30, Issue 2, June 2016, Pages 117-126   

Document Type: Research Article

DOI: 10.22067/jead2.v30i2.54600

Authors

M. Baniasadi^* ; S.A. Jala’ee Esfandabadi

Shahid Bahonar University of Kerman

Abstract

Introduction: The growth of agricultural production and natural resources are from primary objectives of any political system, because this section has a vital role in providing food security. According to the production theories, production growth will come from two sources; more use of production factors within the framework of existing technologies and second, with using more advanced and more efficient production methods and effective use of production factors. In fact, the second one is tied to the concept of productivity. New and efficient technologies are the most important factor for productivity growth. Technology was enhanced through internal and external sources. External sources include spillover technology from developed countries into another country. Empirical evidence on the impact of spillover technology on productivity growth of indigenous producer is vague. One perspective proposes that FDI, technology transferred from developed countries has positive effects on developing countries and another perspective is against it. This paper explores the role of technological spillover on total factor productivity (TFP) growth in agricultural sectors of Iran uses time series data during 1971-2011.
Materials and Methods: In this study, Kendrick model was used to calculate total factor productivity. After calculating productivity, affective factors on it, were examined through ARDL model. The aim of this study is examination of technology spillover on the productivity of agricultural sectors. The degree of technology diffusion grows with increase in technology distance between the hosts and the foreign countries. The greater the technology distance, the more difficult it becomes for developing countries to boost independent innovation. To calculate the index of technology spillover, commercial partners should be considered that are more advanced in science and technology than Iran. For this purpose, commercial partners in this study are Group of Eight developed countries (D8) plus China. Technology spillover indexes are thus decomposed into two components: Imports of capital goods and foreign direct investment (FDI). Index of capital goods imports measures imports of capital goods from major commercial partners of Iran (D8 countries and china). Foreign direct investment (FDI) represents the share of foreign capital in agricultural sectors. Therefore, the empirical analysis of the technology spillover on the productivity of agricultural sectors is based on theatrical framework and ARDL model.
Results and Discussion: According to the results of the ARDL model, technological spillover effect on the TFP of agricultural sector, in long-term shows that technology spillover has a positive and significant effect on agricultural productivity from both channels of capital goods import and foreign direct investment (FDI). But in short-term spillover variable from a capital goods import channel is not significant. This indicates that absorption of the technology from imports of capital goods channel do not perform very well and probably low-tech and without affecting on TFP of agriculture sector is imported. But in long-term technology spillover from imports channels also had a positive impact on total factor productivity of the agricultural sector. In fact, high technologies in long-term can be absorbed through the imports and influenced on TFP. According to thesis study results, the estimated coefficient of error correction term is equal to 0.53.This means that in each period, 53 percent of imbalances of agricultural TFP will be resolved. The average speed of upward of adjustment reflects the fact that in Iran economy, deviations and imbalances have arisen in the agricultural sector TFP caused by technology spillovers shocks, move very fast towards long-run equilibrium.
Conclusions: The purpose of this paper is to advance the knowledge for a key question with evident implications for economic policy: What is the importance of international technology spillover transmitted through trade and FDI for the TFP growth in the agricultural sector of Iran? For this purpose, we have set out from the modeling initially based on a theoretical framework, which is modified by introducing two fundamental channels. Thus, we have included the capital goods imports and foreign direct investment as factors capable of influencing TFP, both directly and indirectly: improving the capacity of absorption of foreign technology. In fact, we have included an explicit measure of international technology spillover which combines the technological capacity of the rest of the country and the weight of the imports that are made from each one of them. The different specifications of the model are estimated using the ARDL method and the period is that from 1971 to 2011. The results achieved reveal, first, the existence of international technology spillover which have had a favorable impact on the TFP growth of the agricultural sector of Iran. Secondly, the paper also provides additional evidence that supports the role of imports and FDI as a channel of transmission of such spillover. This result therefore provided new evidence to the positive influence of FDI on productivity, suggesting, that the higher the technological capacity of the trading partners, the greater this influence will be. In addition, we obtained a very high relationship between FDI shares and the effect of technology spillovers on agricultural productivity.

Keywords

ARDL Model; Capital goods; foreign direct investment; Import

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