The Effects of Good Governance and Financial Reforms on Total Factor Productivity in Iran's Industry and Mining Sector

Document Type : Research Paper


1 Ph.D. Candidate, Department of Economics, Urmia Branch, Islamic Azad University, Urmia, Iran.

2 Assistant Prof., Department of Economics, Urmia Branch, Islamic Azad University, Urmia, Iran.


Objective:This study aims to determine the effect of good governance indicators (voice and accountability, political stability without violent, government effectiveness, regulatory quality, rule of law and control of corruption) and financial reforms (financial liberalization and financial development) on the total factor productivity in Iran's industry and mining sector from 1996 through 2018.
Methods: In this study, the econometric technique of Auto-Regressive Distributed Lag (ARDL) is used to estimate the effects of variables.
Results: The results of estimates indicate that the effect of all indicators of financial reform on total factor productivity is positive in short term and long term.  In terms of good governance indicators, we see a positive relationship with variables of government effectiveness and regulatory quality, and a negative relationship with corruption control variables. Also, the effect of variables of voice and accountability and the rule of law are negative in short term and are positive in long term. Political stability without violent also has no effect on total factor productivity.
Conclusion: Since financial indicators and good governance have not reached ideal levels in Iran, and we are still witnessing significant fluctuations in this area, the trend of productivity components in industry and mining has not been very significant. Therefore, failure to improve and expand these indicators can have irreparable consequences for the trend of productivity of industry and mining sector and it seems necessary to provide the grounds for further strengthening and expanding the indicators of financial reform and good governance to improve the productivity of the industry and mining sector.


Abdullahi, D. (2013). Effects of Financial Liberalization on Financial Market Development and Economic Performance of the SSA Region: An Empirical Assessment. Economic Modelling, 30(1), 261-273.
Adeusi, S. O., & Aluko, O. A. (2015). Relevance of Financial Sector Development on Real Sector Productivity: 21st Century Evidence from Nigerian Industrial Sector. International Journal of Academic Research in Business and Social Sciences, 5(6), 118-132.
Atrkar Roshan, S., Mousavi, M. H., & Rasouli, F. (2015). Measuring and Analyzing the Productivity Index and Evaluation of Industrial Performance (Kordestan Province). The Macro and Strategic Policies, 3(9), 97-121. (in Persian)
Balcerzak, A. P., & Pietrzak, M. B. (2016). Quality of Institutions and Total Factor Productivity in the European Union. Statistics in Transition, 17(3), 497-514.
Barkhordari, L. (2016). The Effect of Capital Aaccount Liberalization on Labor Productivity. Master Thesis, Tehran: University of Tehran Alborz Campus. (in Persian)
Batuo, M., Mlambo, K., & Asongu, S. (2018). Linkages between Financial Development, Financial Instability, Financial Liberalisation and Economic Growth in Africa. Research in International Business and Finance, 45(3), 168-179.
Bayyurt, N., Vildan Serin, Z., & Eban Arıkan, F. (2015). Good Governance and Agricultural Efficiency. Journal of Social and Development Sciences, 6(1), 14-23.
Behbudi, D., Barghi Oskooee, M. M., & Mohammadi, R. (2018). The Effects of an Increase in the Investment and the Total Factor Productivity of the Mining Sector on the Value Added and Export of Different Economic Sectors in Iran. Applied Theories of Economics, 4(4), 199-227. (in Persian)
Castelnovo, P., Chiara, F. D. B., & Massimo, F. (2019). Quality of Institutions and Productivity of State-Invested Enterprises: International Evidence from Major Telecom Companies. European Journal of Political Economy, 1(58), 102-117.
Central Bank. (2020). Economic Time Series Database. Retrieved from (in Persian)
Central Bank. (2020). Retrieved from 
(in Persian)
Cheona, S., Dowallb, D. E., & Songc, D. W. (2010). Evaluating Impacts of Institutional Reforms on Port Efficiency Changes: Ownership, Corporate Structure, and Total Factor Productivity Changes of World Container Ports. Logistics and Transportation Review, 46(4), 546-561.
Foster, N., Pöschl, J., & Stehrer, S. (2012). Manufacturing Productivity: Effects of Institutions and Service Sector Innovations. The Vienna Institute for International Economic Studies, 3(1), 1-16.
International Labour Organization. (2015). Retrieved from
Jiang, Ch., & Zhang, P. (2017). Threshold Effects of Capital Account Liberalization on Productivity: Bootstrap Method in Non-dynamic Panels. Wireless Personal Communications, 102(4), 713-723.
Jude, E. (2010). Financial Development and Growth: A Panel Smooth Regression Approach. Journal of Economic Development, 35(1), 15-33.
Karimmian, Z., Mohammadi, M., Ghazinoori, S. S., & Zolfagharzadeh Kermani, M. M. (2019). Classification of Governance Features through Policy Networks Using Meta-synthesis Method. Journal of Public Administration, 11(3), 377-402. (in Persian)
Kaufmann, D., Kraay, A., & Mastruzzi, M. (2010). The Worldwide Governance Indicators: A Summary of Methodology, Data and Analytical Issues. World Bank Policy Research Working Paper, 5430, 1-28.
Masron, T. A. (2013). Promoting Intra-ASEAN FDI: The Role of AFTA and AIA. Economic Modelling, 31(1), 43-48.
McKinsey & Company. (2010). Retrieved from http://
Mehregan, M. R., Hosseinzadeh, M., & Rabie Servandi, N. (2019). Modeling the Disturbance- Dynamics Model of Human Resources Development in Iran's Oil Industry. Journal of Public Administration, 11(2), 309-338. (in Persian)
National Iranian Productivity Organization. (2020). Retrieved from (in Persian)
Neupane, E. (2013). Efficiency and Productivity of Commercial Banks in Nepal: A Malmquist Index Approach. Asian Journal of Finance & Accounting, 5(2), 220-243.
Ni, N., & Liu, Y. (2019). Financial Liberalization and Income Inequality: A Meta-Analysis Based on Cross-Country Studies. China Economic Review, 56(3), 1-17.
North, D. C. (2016). Institutions and Economic Theory. The American Economist, 61(1), 72-76.
Onoja, J. (2017). Financial Sector Development and Agricultural Productivity. Master's Thesis, San Francisco: University of San Francisco.
Parsaeian, Z. (2011). Analyzing the Role of Financial Market Development on Improving Capital Productivity: A Case Study of Industry and Mining. Master Thesis, Tehran: Islamic Azad University of Central Tehran Branch. (in Persian)
Procházka, P., & Čermáková, K. (2015). Influence of Selected Institutional Factors on the Economic Growth: Case Open Markets. Procedia Economics and Finance, 30(1), 702-709.
Rahmani, T., & Motamedi, S. (2018). The Impact of Foreign Direct Investment on Capital Formation, Productivity and Economic Growth in Developing Countries. Economic Growth and Development research, 8(30), 117-132. (in Persian)
Rahnavard, F., Alipour, H., Dehdar, F., Khalili, H. (2019). The Framework of Government-Citizen Relationship in Iran: An Institutional Approach. Journal of Public Administration, 11(1), 27- 46. (in Persian)
Rezaei, E. (2012). Looking at The effects of Institutional Factors on TFP Growth In Iranian Economy: A State Space Model. Journal of Economic Modeling Research, 2(6), 43-60. (in Persian)
Saghafi, P. (2015). The Effect of Good Governance on Total Factor Productivity in Selected Developing Countries. Master Thesis, Tabriz: Islamic Azad University. (in Persian)
Salimi, J., & Maknoon, R. (2018). Qualitative Meta-analysis of Scientific Researches Concerning the Issue of Governance in Iran. Journal of Public Administration, 10(1), 1-30. (in Persian).
Samargandi, N. (2018). Determinants of Labor Productivity in MENA Countries. Emerging Markets Finance and Trade, 54(5), 1063-1081.
Sankoh, L. (2017). Nonlinearity between Financial Development and Productivity Growth in Emerging Markets. Master's Thesis. University of Baltimore.
Sayfolahi, N., & Hazeri, H. (2017). The Effect of Financial Development on Labor Productivity: Cointegration Application in Dynamic Panel Data. Financial Monetary Economics, 24(13), 252-271. (in Persian)
Serdaroğlu, T. (2015). Financial Openness and Total Factor Productivity in Turkey. Procedia Economics and Finance, 30(1), 848-862.
Sethi, P., Chakrabarti, D., & Bhattacharjee, S. (2020). Globalization, Linancial Development and Economic Growth: Perils on the Environmental Sustainability of an Emerging Economy. Journal of Policy Modeling, 42(3), 520-535.
Solow, R. (2016). Resources and Economic Growth. The American Economist, 61(1), 52-60.
Stiglitz, J. E. (2012). Good Growth and Governance in Africa. Oxford: Oxford University Press.
Tashkini, A. (2018). Applied Econometrics with Microfit. Tehran: The Dibagaran Publishers.
 (in Persian).
Tavares J. (2009). Economic Integration and the Comovement of Stock Returns. Economics Letters, 103(2), 65-67.
Valizadeh, A. (2016). The Intersection Effect of Intellectual Capital and Inflation on Industrial Sector,s Performance in Iran. Master Thesis, Tabriz: Islamic Azad University. 
(in Persian)
World Bank. (2020). World Development Indicators. Retrieved from
World Bank. (2020). Worldwide Governance Indicators. Retrieved from
Yang, H., Shi, F., Wang, J., & Jing, Zh. (2019). Investigating the Relationship between Financial Liberalization and Capital Flow Waves: A Panel Data Analysis. International Review of Economics & Finance, 59(3), 120-136.
Zamanian, Gh., & Abdi, Z. (2016). Estimating the Degree of Protection in Iran's Steel Industry. Journal of Trade Studies, 20(77), 31-58. (in Persian)
Zghidi, N., & Abida, Z. (2014). Financial Development, Trade Openness and Economic Growth in North African Countries. The Romanian Economic Journal, 17(53), 91-120.