Impact of Economic Inputs on Production of Transportation Services in Iran

Abstract

In recent years, the value-added created in the transportation industry is about 8 percent of GDP of Iran. Due to the high-induced effect of transportation sector on the whole economy, analyzing transportation production function and its determinant is of great value for policymakers. The objective of the present research is to estimate the transportation production for the case of Iran and to examine the economic inputs of this sector using the auto-regressive distributed lags (ARDL) method based on time series of 1960 to 2014. The research results show, In long-term, the effect of capital, in comparison to energy input and labour, on the production of transportation services is quite stronger by production elasticity of 0.81 while labour and energy production elasticity is near 0.07 and 0.21. Based on the statistical test, the hypothesis of the existence of the economy of scale in transportation sector could not be rejected. Moreover, the coefficient of error correction term is equal to (-0.29), indicating a 29% adjustment toward equilibrium in each period, which It means, after imposing any shock in transportation production, it takes about three periods (years) to converge again to the long run trend.