Inputs Accumulation or Productivity: Which Factor Is the Leading Contributor to Economic Growth in Iran?

In this study, we attempted to determine the key factors leading to economic growth for Iran economy over the period 1960–2006. In particular, we sought to clarify whether the growth of Iran was driven mainly by factor accumulation or by improvements in efficiency namely, debate of K (factor accumulation) versus A (productivity gains). The analysis of the sources of growth shows that the role of Total Factor Productivity (TFP) in determining economic growth is insignificant and often detrimental. Most of the growth is due to the accumulation of physical capital and improvements in the quality of labor. Thus, we conclude that in the debate of A versus K we take the side of K. Bases on the experiences of Iran as a oil dependent country, accumulation of capital seems to be the major determinant of economic growth.