A Comparative Analysis of Efficiency in Iran's Provincial Manufacturing Sector during the Development Plans after the Revolution

The purpose of this paper is to measure the technical efficiency of the manufacturing sector in Iran's provinces during the development plans after the revolution. This analysis focuses on the comparison of provinces in terms of manufacturing performance and the determinants of technical efficiency. The model used to measure that efficiency is based on the stochastic frontier approach (SFA) devised by Battese and Coelli (1995).
The results show that the efficiency levels in the manufacturing sector are low. Even in the third development plan, as the best case, the average efficiency level was 0.401, which is very low. Although the average technical efficiency has been low, some provinces have had a considerable performance in this regard. The highest and the lowest technical efficiency levels ever recorded are 0.652 and 0.202 belonging to Khouzestan and Sistan Balouchestan provinces respectively.
Among the effective factors impacting efficiency, government ownership of industrial units and energy intensity are found to have negative impacts while enterprise size (i.e. the average value added of an industrial unit) has a positive impact on efficiency. The research also shows that provinces such as Kerman and Hormozgan, have had the highest average efficiency as compared to mega-industrial provinces.
All in all, the most important policy which can be recommended based on this research is that, given the low efficiency level in the huge industrial sector, an increase in the efficiency can be attainable through economic management empowerment in public industrial enterprises and optimum allocation of production factors in the sector.