An econometric study of the industrial production function in Iraq for 1970-1979

This study is a production function study of the major industries of Iraq.

The researcher applied the Cobb-Douglas production function to eleven industries over the period from 1970 to 1979. The variables considered were labor and capital investment.

The purpose of this study was to investigate the contributions of labor and capital to estimate the possible outcome of added investment. The importance of such production capability to the economy of Iraq has increased with growth in capital availability due to increased revenues from the oil industry since 1974.

Iraq suffers from shortages of qualified managers, skilled laborers and technicians. There is an urgent need to develop and employ an effective, well-trained work force for industry and agriculture in the future.

This study indirectly identifies the major causes of productivity problems in Iraq. It provides analysis which directly relates to investment. Major findings indicated that:

1. The labor shares of output in general are proved to be low, compared to the high share of capital.

2. The marginal productivity of capital in all Iraqi industries is higher than the marginal productivity of labor.

3. Labor investment was less than what would be warranted according to Cobb-Douglas theory. Consequently, capital investment was greater than would be warranted.

The results of this study indicate several recommendations for further research:

1. The study needs to be conducted on a single industry in order to get better estimates.

2. More data should be related to labor to more directly differentiate between skilled and unskilled labor.

3. Actual measure of labor and capital should be collected from the industries directly to be more accurate and reliable.