Decomposition of the effect of technological change on output growth in Iranian agricultural sector: A structural decomposition analysis

Abstract:
Technological change is one of the most important sources of the output growth not only on the supply side but also on the demand side of the economy. The output growth in the demand side happens because, technological change in each of the economic sectors causes input substitution among production inputs that can influence the growth of output in other sectors through the backward linkages. In the present study, the impact of technological change in the Iranian economic sectors on the production growth of four agricultural sub-sectors has been analyzed over 1986-2001 periods. To this end, structural decomposition analysis methodology has been utilized using input-output tables of the years 1986, 1991, and 2001. Following this approach and as a first step, output growth has been decomposed into three main components including, changes in final demand, import substitution, and technological change. Then, the technological change effect has further been decomposed into individual coefficients that reveal technological change effects in each of the economic sectors on the growth of output in agricultural subsectors. Results indicate that growth of agricultural products is highly influenced by technological change in food industries which has been relatively livestock and poultry using and the other agricultural products saving. This result emphasizes the necessity of developing food industries for processing cropping, horticulture and fisheries products parallel to the development of livestock and poultry processing industry.