Higher education, technical efficiency and total productivity changes: evidence from Iran's manufacturing industries

The purpose of this article was to estimate the effect of higher education on total productivity changes and technical efficiency in the 4-digit classification code of ISIC in Iran during the period of 1994-04. In this regard, a two-way stage approach was used. In the first stage, Malmquist Productivity Index (MPI) and technical efficiency index by Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA) were estimated. The findings indicated that the average MPI was more than one for all industries, indicating a positive growth in total productivity. While the average technical efficiency changes in industries have been negative for all years, technological progress is the main factor in the positive growth of total productivity. In the second stage, utilizing integrated data regression with Generalized Method of Moments (GMM), the effect of higher education on total productivity changes and technical efficiency was estimated. The results showed that higher education has a positive and significant effect on both total productivity and efficiency in manufacturing industries; somehow that the total productivity elasticity relative to higher education is between 0.13 – 0.23 and efficiency elasticity is between 0.28 – 0.38.