Productivity of Industrial Capital and Labor, Kurdistan Region, Iraq (1995-2008)

Abstract

Productivity is growing in importance in Kurdistan as it evolves into a more formal, market-based economy. The measurement of productivity and factors of production - labor and capital – are important indicators of industrial firm performance, with an increase in productivity positively affecting economic growth. This research attempts to quantify the impacts of labor & capital on industrial productivity in the Kurdistan region, Iraq. Moreover, the correspondence between a number of hypotheses and empirical findings are examined. Specifically, this research creates a protocol to enable comparison among productivity indicators in production units in industrial firms. We examine the role of capital and labor forces on productivity in industries of Kurdistan over the 1995-2008 period. The study uses the added values of output, the number of workers, and capital value on productivity. Total Factor Productivity (TFP) is another indicator that is estimated in this research. The results indicate that the growth of industrial firms in Kurdistan is influenced more by labor than by capital productivity. The measurement of these effects is 0.65 and 1.42 for labor and capital, respectively. The production function exhibits increasing returns to scale. It can be concluded that labor is more significant to productivity than capital in this region. It reinforces the low level of technology in firms. Capital per worker (k=K/L) has a positive and significant effect on productivity in industrial firms of Kurdistan region.