VOL. 5, NO. 2, 207 Singaporean Journal of BuSineSS Economics, and managemen sudies (sjbem) DOI: 0.286/0039976 Research Research Aricle Aricle NBL NLB Esimaion of producion funcion and labor produciviy rae in Aghajari Oil and Gas Producion Company Alireza Jahandideh Amirhossian Chambaria Deparmen of Economics, Science and Research Ahvaz Islamic Azad Universiy, Ahvaz, Iran. Corresponding E-mail: edior.hna@gmail.com Absrac Considering he imporance of oil in naional income and gross naional produc, he esimaion of oil producion funcion is of paricular imporance. In his regard, Karoon Oil and Gas Producion Company as he larges oil and gas producion company in Iran was seleced as he research subjec and is producion funcion been esimaed during he period 989-20. For his purpose, he reliabiliy of he sudy variables was examined by Dickey - Fuller Augmened es. Then, he error correcion model was esimaed using Engel-Granger coinegraion. The resuls showed ha he funcion is in he form of Cobb - Douglas during he sudy period. The elasiciy of labor force, capial and energy are 0.398, 0.82 and 0.589, respecively. The Wald es resul indicaes ha here is increasing reurn o scale. Keywords: produciviy, producion funcion, oil and gas, coinegraion, Granger-Engle. Inroducion Given ha oil indusry plays an imporan role in Gross domesic producion, sources of foreign exchange and share of oil revenues in he sae budge, Aghajari Oil and Gas Producion Company was seleced as he subjec of he research, because i produces abou 20 percen of Iran s oil and also is considered as one of he subsidiary companies of Naional Iranian Souh Oil Company wih a producion capaciy of more han 65,000 barrels per day. Today, achieving economic growh hrough increased produciviy and producion is among he mos imporan economic goals of he organizaions, so ha he close relaion beween social welfare and economic growh made managers and planners seeking a beer undersanding of economic growh sources. The promoion of produciviy wih efficien use of producion facors opens up new horizons in achieving susainable developmen, and hus i mus be acceped ha serious aenion o he issue of produciviy, knowledge and he effec of producion facors migh allow achieving he economic growh rae sipulaed in he fourh developmen plan. As saed in Secion V of he Fourh Developmen Plan: Since he human resources reducion policies and increasing educaed people a significan effec on produciviy, he calculaion of producion funcion and esimaion of he labor produciviy rae is a good guide for fuure policies of managers. The main objecive of his paper is o esimae he elasiciy of producion facors and he rae of labor produciviy in Aghajari Oil and Gas Producion Company. Firs we will menion he heoreical foundaions and some of he similar research already done in his field. Then, in he secion of mehodology and empirical resuls, he relaionships beween various facors of oil and gas producion are examined and inerpreed using he esimaed producion funcion. In 8
Singaporean Journal of BuSineSS economics, and managemen SudieS addiion, he impac of each inpu on producion, he producion sensiiviy o each of he producion facors and he reurn o scale raio are invesigaed. Finally, he overall conclusion of he presen paper will be provided. Theoreical Framework The erm produciviy was firs used in 766 by Francois Quesnay, pro Physiocracy school (sae of naure) mahemaician and economis. Quesnay proposes he economic able plan and sees he auhoriy of any governmen subjec o he increased produciviy in he agriculural secor. Afer more han a cenury, in 883, someone named "Lire" defined produciviy as he science and echnology of producion. Wih he incepion of scienific managemen movemen in he early 900s, "Frederick W.Taylor" and "Frank and Lillian Gilbreh" carried ou some sudies on labor division, improving mehods and deermining he sandard ime in order o increase labor efficiency. "Efficiency" is defined as a raio of he acual work ime o he predeermined sandard ime. New mehod of measuring he efficiency and produciviy was expressed in 957 by "Farrell" he famous economis. However, he measuremen possibiliy was provided wih he effors of economiss and operaional research expers in 977 using economerics (SFA) and in 978 using linear programming (OEA) mehods. Produciviy is defined as he raio of he producion of goods and services, or ses of goods and services (oupu) o one or more inpus ha affec he producion of hose goods and services. Organizaion for Economic Cooperaion and Developmen defines produciviy as he raio of oupu (producion) o one of (oal) producion facor. ILO defines produciviy as follows: Differen producs are produced by inegraing four main facors. These four facors include land, capial, labor and organizaion. The raio of inegraing hese facors on producs is a measure for produciviy. Produciviy is realized in sociey when all producive, social and service secors are rying o use a proper produciviy sysem where he legislaor can usually pave he way for creaing produciviy. To improve produciviy, firs of all he facors affecing produciviy should be idenified. There are many caegories of facors affecing produciviy made by specialiss and expers, below we menion some of hem: Nakayama divided he facors affecing produciviy ino shor-erm and long-erm facors. Inernaional Labor Organizaion deermines he facors affecing produciviy in hree caegories: general facors (climae, geographic disribuion of raw maerials, ec.), organizaional and echnical facors (qualiy of maerials, locaion and delivery of facory, ec.) and human facors (managemen and saff relaionships, social and psychological condiions of work, ec.). One of he repors of produciviy reviews by he Minisry of Labor in Japan divided he facors affecing produciviy ino hree caegories: deploymen of equipmen and personnel, labor skill and qualiy of maerials. Samanah accouns for some of he mos imporan facors affecing produciviy in he Unied Saes, including he amoun of invesmen, he raio of capial o work, research and developmen, capaciy uilizaion, governmen regulaions, facory and equipmen lifeime, composiion of labor, and so on. Souer Meiser considers produciviy as he cener of a circle and he facors affecing produciviy are classified in concenric circles according o heir degree of imporance. Some oher economiss classified he facors affecing produciviy as follows: Technological changes The workforce capaciy which is limied o he specific capabiliies and capabiliies of he worker. The amoun of capial per uni of labor, which reflecs he degree of concenraion of capial or he volume of capial can be consumed by he uni of labor. Prokopanko provided he following classificaion of he facors affecing an organizaion s produciviy: Exernal facors refer o he facors ha influence he organizaion from ouside which are no under he auhoriy of managers wihin he organizaion. I means ha he organizaional managemen is no able o conrol or affec hem in he shor erm. In he 9
Singaporean Journal of BuSineSS economics, and managemen SudieS end, he organizaion mus adap iself o he changes hey make. The exernal facors affecing an organizaion s produciviy are divided ino hree groups: srucural reform, naural resources, and infrasrucures and sae. Inernal facors hese facors are under he auhoriy of individuals and managers wihin he organizaion and a proper managemen can use hem wih high efficiency. These facors can be divided ino hardware and sofware. The hardware consiss of four secions of producion, plan and equipmen, echnology and maerials and energy. The sofware facors include he four secions of people, organizaion and sysem, mehods of work and managemen syle. In general, he componens of produciviy improvemen can be oulined as follows: Employee paricipaion, incenives, moivaions, profi share, ownership measuring, monioring, leadership, goals, communicaion, eamwork, collaboraion, educaion, lifesyle, work environmen, respec, growh poenial, job design, job securiy, job saisfacion, posiive moivaion, planning, job independence, srucure, characer, educaion and developmen, commimen o qualiy, flexibiliy and moivaion. From heoreical perspecive, labor produciviy growh is obained from wo sources: per capia capial growh and oal-facor produciviy improvemen. Capial producion echniques increase he labor produciviy and improved oal-facor producion produciviy increases he labor produciviy. Improved oal-facor producion produciviy can be he resul of facors such as beer managemen of producion resources (including opimal resource allocaion and beer use of available resources and faciliies), increased human capial (including improving he healh levels, increasing he educaion level and skills of he workforce), increased moivaion of he workforce for more and beer work, creaiviy and innovaion, reforming he age, gender, and job srucure of he workforce and echnology advancemen. The user producion echniques also increase capial produciviy and improving oal producion facors will increase he capial produciviy. Research Background Hadi Zenouz and Bakhiari (200), in heir sudy, invesigaed he facors affecing he produciviy of producion facors in Carbon Iran Company during he period of 999-2008 using he Cobb-Douglas producion funcion mehod. In his funcion, he explanaory variables include: simple workforce, exper workforce, and capial and energy invenory, where heir firs-order changes in he producion funcion esimaion are used o eliminae he nonsaionary daa. The resuls show ha he simple and exper workforce produciviy, despie he severe flucuaions, had relaive growh. Energy produciviy grown considerably; alhough he capial invenory used in he manufacuring process increased due o greaer uilizaion of he machinery capaciy, oal capial invenory produciviy is decreasing sharply. Akhgar (200), in his maser's hesis iled "Esimaing he elasiciy of producion facors and labor produciviy rae in maroon oil and gas producion company", esimaed he producion funcion and he rae of labor produciviy in he company using ime-series daa during 989-2009. For his purpose, he reliabiliy of he variables was esed using Augmened Dickey-Fuller es. Then, he error correcion model was esimaed using Engel-Granger coinegraion mehod. The resuls showed ha during he sudy period, he funcion is in he form of Cobb-Douglas as follows: (Equaion ) The elasiciy of labor force, capial and energy are 0.66, 0.3 and 0.6, respecively. Wald es resuls show an increasing reurn o scale equal o.58. Ghalambaz, in his maser hesis eniled "Esimaing he producion funcion and labor produciviy rae in karoon oil and gas producion company", esimaed he producion funcion and he rae of labor produciviy in he company using he ime-series daa during 989-2009. For his purpose, he reliabiliy of he variables was esed using Augmened Dickey-Fuller es. Then, he error correcion model was esimaed using Engel- Granger coinegraion mehod. The resuls showed ha during he sudy period, he funcion is in he form of Cobb- Douglas as follows: (Equaion 2) 0
Singaporean Journal of BuSineSS economics, and managemen SudieS LQ 0/55LK 0/645LL 0/552 LF 0/997AR () R 2 0/99 Also, he average produciviy growh in Karoon Oil and Gas Producion Company is 8.3%. The elasiciy of labor force, capial and energy are 0.64, 0.5 and 0.55, respecively. Wald es resuls show an increasing reurn o scale equal o.34. Marzieh Varzeshi (2008), in his maser's hesis iled "Measuring and analyzing he produciviy of producion facors in large indusrial facories in Iran during he period of 983-2006, esimaed he oal produciviy of producion facors using he producion funcion mehod and evaluaing he parial produciviy of he producion facors using he value added mehod. Analysis of he facors affecing he labor produciviy shows ha he variables per capia capial, R & D cos and he increased raio of acual o poenial producion or, in oher words, he reduced unemployed capaciy posiive effec on labor produciviy, whereas he human developmen index and he raio of privaizaion o sae budge do no a significan effec on labor produciviy. Analysis of he facors affecing he labor produciviy shows ha he variables of average labor per uni of capial, R & D cos and he increased raio of acual o poenial producion posiive impac on he capial produciviy, while he ineres rae o inflaion (as an alernaive for he gap beween inflaion rae and ineres rae and he subsidies assigned o he capial) a significan effec on he capial produciviy. During he whole sudy period, he overall produciviy of he producion facors and he capial produciviy decreased and average annual growh of (-0.59) and (- 0.85) percen, respecively. I is while he labor produciviy increased wih an average annual growh of (5.8%). Ali Imami Meybodi and Zahra Izadi (2008), in heir sudy, measured he echnical efficiency and produciviy in Iranian oil refineries during he period 200-2007 using daa envelopmen analysis (DEA). In his aricle, he average echnical efficiency of refineries in he counry during he menioned years was a mos 88% in 2009 and a leas 8% in 2003. Lavan Refinery been operaing efficienly during all he years and Isfahan Refinery was efficien for many years. The refinery of Tehran in 200 and 2002 and Bandar Abbas Refinery for many years had he leas efficiency. Also, he echnical efficiency of Bandar Abbas Refinery been decreasing in such a way ha dropped from 72% in 200 o 56% in 2007. The resuls of produciviy measuremen indicae ha oal produciviy been mildly increasing from 2002 o 2007. In addiion, in 2007, he oal produciviy increased significanly as a resul of echnological changes, and herefore he main facor in improving produciviy was considered echnological advancemen. Mahmodzadeh and Asadi (2007) sudied he effecs of informaion and communicaion echnology on he growh of labor produciviy in Iranian economy. In his sudy, considering experimenal and heoreical models, he labor produciviy funcion was esimaed in erms of ICT and using he ime-series daa of 97-2003 and ordinary leas square mehod (OLS). The esimaion resuls show ha oal produciviy and non-ict capial he mos impac on labor produciviy in he Iranian economy. The effec of human capial and ICT capial on labor produciviy is posiive and significan, bu heir effec is lower han ha of variables. The resuls of his sudy on ICT are consisen wih he mos empirical sudies in developing counries. Masayuki Morikawa (200) examined he effec of labor unions on produciviy, profis and wages in more han 4,000 indusrial and non-indusrial companies over he period 998-2004. The daa were analyzed based on some revised informaion exraced from he srucure of job and aciviy (he Minisry of Economy and Indusry) and he Insiue of Managemen (Inernaional Labor Organizaion) and hen esimaed using ordinary leas squares mehod. These secors sared heir aciviies since 99, and each year sudy more han 25,000 indusrial and non-indusrial companies wih more han 50 employees. The esimaion resuls show ha: There is a significan posiive relaionship beween he formaion of labor unions in Japanese indusrial and nonindusrial companies and produciviy and wages. There is a weak relaionship beween he formaion of labor unions in indusrial and non-indusrial companies and he profiabiliy of companies.
Singaporean Journal of BuSineSS economics, and managemen SudieS The relaionship beween he employmen growh in companies and he formaion of labor unions depends on he number of par-ime workers, o he exen ha reducion in he number of par-ime employees in he companies wih union membership is greaer han ha of non-unionized companies, which depends on he willingness of his group of workers o form such unions. According o he surveys, he number of par-ime employees in he companies wih union membership decreases by abou 0.3% per year while i is increasing by.% per year in nonunionized companies. Tzu- Pu Chang,Jin Li Hu (200) invesigaed he changes in oal produciviy of energy facors, energy efficiency and echnical progress in 29 provinces in China by calculaing oal-facor energy produciviy index (TFEPI) during he period 2000-2004. The variables influencing his index include human capial, GDP, he mixed energy (oil, naural gas, elecriciy and coal) and region (according o he developmen sraegy of he wesern naions, hese 29 provinces are divided ino hree easern, wesern and cenral regions) and he produciviy index in each region was esimaed using he leas squares mehod (OLS). The resuls are as follows: Toal-facor energy efficiency was declined by.4% per year from 2000 o 2004 (especially 3.2% beween 200 and 2002). Energy efficiency was improved by 0.6% per year during his period (wih he excepion of he period 200-2003 wih a negaive growh rae). The echnical progress of energy was reduced by 0.2% per annum (in fac, he decline in produciviy resuled from a reducion in echnical progress no energy efficiency). The easern par of Japan was more producive han he oher wo. Increased GDP by developing secondary indusries a posiive effec on produciviy. Increasing he share of mixed energy, especially elecriciy, increases produciviy. Increasing human capial indirecly increases produciviy. Sveinn Agnarsson e al. (2009), in a sudy, esimaed he producion funcion of Iceland fishing flees in he period 989-994 using panel daa and ordinary leas squares (OLS). The daa includes annual observaions of nine fishing flees from 994 o 989 and conains he daa on ship characerisics (size and lengh of he ship, engine size and lifeime), coss, sales and quaniies of fish caugh (Capelin mulle and Herring mulle) in ons. According o Fisheries Sociey (FI), abou 40 boas were classified as fishing flee in hose years. Thus, our sample includes 25% of he populaion. The esimaion resuls are as follows: Unexpecedly, he engine size parameer is negaive, which means ha he ships wih large engines more access o fish han small ones. The engine lifeime is negaive, which indicaes he harmful effec of an old engine on he oal inake of ships. The parameer of Hering mulle s share is significanly posiive, while i is no significan if combined wih he Capelin mulle. This illusraes he fac ha if he ships are normally operaed, all of heir caugh fishes are Hering mulle, and he Capelin mulle conains a small percenage of heir caches. In general, he oal fish quoa per year depends largely on esimaes from fish eggs o explain he resuls. Halpern e al (2009) examined he effec of impors on produciviy in manufacuring companies in Hungary during he years 992 o 2003 using he Cobb-Douglas producion funcion. The resuls show ha: Increasing impors a major impac on produciviy improvemen, o he exen ha increasing he share of impors from zero o 00% increases produciviy by 40%. The remaining 60% of he produciviy increase is due o imperfec subsiuion beween goods. So = 9/4 which indicaes he small elasiciy of subsiuion of foreign and domesic producs. 2
Singaporean Journal of BuSineSS economics, and managemen SudieS The reducion of impor ariffs in his sudy a significan effec on produciviy improvemen, which causes he enry of new companies o he marke of impored goods. The researchers sugges ha he conex for imporing capial goods o he counry should be provided for furher increase in produciviy. Dupuy& Marey (2008) invesigaed he changes in skilled labor produciviy in he Unied Saes. Using he U.S daa from 963 o 2002, hey found ha decreased elasiciy of subsiuion beween skilled and unskilled labor force in he lae 970s decreases he produciviy improvemen rend. The increase in he elasiciy of subsiuion in he 990s acceleraed he process of produciviy improvemen a his decade. Andre Varella Mollick and Rene Cabral (2008) sudied he effecs of labor produciviy and oal facor produciviy (TFP) on employmen in 25 manufacuring indusries in Mexico using panel daa echniques and Cobb-Douglas producion funcion during he period 984-2000. I should be noed ha among 28 indusries, 3 cases including Code 354 (differen producs of peroleum and coal), Code 323 (leaher goods) and Code 353 (oil refineries) were excluded due o a negaive impac on fixed capial and only 25 indusries were examined. The resuls show ha he increase in oal facor produciviy and labor produciviy on a posiive effec on he employmen of small capial indusries in Mexico. The facors such as increased wages, duy cycle and he implemenaion of NAFTA should be used o improve produciviy in he employmen. The above resuls are inverse in large capial indusries. Research Mehodology The use of economeric models o analyze economic relaions a hisory of more han half a cenury. Economeric models been developed during his period and heir use also increased significanly. This developmen and increased applicaion is boh due o he promoion of economic knowledge and heory and hanks o he rapid developmen of saisical mehods and ess. In addiion, he significan boos in compuaional power of compuers and he emergence of advanced sofware applicaions, along wih improving he qualiy of saisical daa and survey, had an imporan role in he widespread use of economeric models. I should be said ha, despie he limiaions of mahemaical models o reflec he comprehensive and horough economic behavior of human socieies, here are no ools beer han macro-economeric models o analyze economic developmens and observe he possible effecs of economic policies. In he presen sudy, ime-series daa and regression analysis been used. In his regard, Karoon Oil and Gas Producion Company as he larges oil and gas producion company in he counry is seleced as he research subjec and is producion funcion been esimaed during he period 989-20. For his purpose, he reliabiliy of he variables was esed using Augmened Dickey-Fuller es. Then, he error correcion model was esimaed using Engel-Granger coinegraion mehod. The ime series models ofen used for shor-erm predicions essenially explain he behavior of he variable based on is pas values and possibly he pas values of he oher variables we would like o predic. These models are able o provide accurae esimaes of he variables, even in cases where he underlying economic model is unclear. Assume ha (Equaion 3) E( y Var Cov ) y is a random ime series wih he following feaures: 2 2 ( y ) E( y ) ( y, y k ) E[( y )( y k )] Corr( y, y k ) y k 2 / k k 2 Where he mean, variance, covariance k and correlaion coefficien k are he consan values independen from he ime. Now suppose we change he inerval, so ha y change from y o y -m. In his case, if he mean, variance, covariance and correlaion coefficien y did no change over ime, i can be said ha he ime series variable y is reliable. 3
Singaporean Journal of BuSineSS economics, and managemen SudieS Types of reliabiliy ess used in his sudy include uni roo for reliabiliy, Dickey-Fuller Tes, Augmened Dickey- Fuller Tes, Phillips and Perron, Coinegraion Uni Roo and reliabiliy based on auocorrelaion char. Experimenal resuls The use of economeric mehods for empirical works is based on he reliabiliy of variables. The sudies show ha his assumpion is false abou many economic ime-series and mos of hese variables are unreliable. Therefore, in accordance wih he coinegraion heory in modern economerics, i is essenial o inquire abou heir reliabiliy or unreliabiliy. For his purpose, we use Augmened Dickey-Fuller uni roo es. The resuls of he ADF es a he firs level and difference of ime-series of producion funcions are provided in able () and in appendix. Based on he ess, we conclude ha he null hypohesis (he exisence of uni roo) is no rejeced for any of he variables and all he variables are unreliable in he daa. However, resuls of repeaing he es on he firs difference of he variables showed ha he unreliabiliy of all variables is rejeced afer a differencing. Therefore, based on Dickey- Fuller Tes, all variables in he model are he funcion of firs-class collecive producion. Symbol D represens he firs difference. Table (). The resuls of he ADF es on ime-series daa Dickey Fuller MacKinnon Variable Inercep τ saisic criical value Q DQ L DL K DK F DF LQ DLQ LL DLL LK DLK LE DLE LLLK DLLLK LLLFE DLLLE LKLE -2/078648-5/24687 2/62089-5/064980-2/647245-3/70692-2/288568-3/69694-2/74377-5/053470 0/56826-4/07587 -/343585-3/828387 -/39339-4/088997 0/42408-4/208746 0/047373-4/357330-0/802890-3/632896-3/658446-3/69084-3/658446-3/632896-3/644967-3/632896-3/69084-3/69084-3/632896-3/632896-3/69084 Process Has Has Has Has Has Pause Resul 4
Singaporean Journal of BuSineSS economics, and managemen SudieS DLKLE 22 643 /4 690 84 /3 LK 2 -/378249-3/632896 DLK 2-3/82447 644 963 / 3 - LL 2-0/76602 632 896 /3 DLL 2-4/008096 644 963 /3 LF 2 -/3779 690 84 / 3 - DLF 2-4/075852 690 84 / 3 - (Source: Eviews Sofware Oupu) Has Now, we use Engel-Granger coinegraion es in order o show ha he esimaed regression is no false and he es saisics F and are valid. Consider wo ime-series Y and X ha boh are I(d). Normally, any linear combinaion of Y and X is I(d). Bu if here were consans such as α and β in a way ha he disurbing erm of regression (i.e. x β - U = y -α) a mass order less han d, for example I (d-b) (b> 0), hen according o he definiion of Engle and Granger (987), Y, X are coinegraed wih order (d-b). According o he above definiion, if Y, X boh are of collecive order like I() and U~I(0), hen hey will be wo coinegraed ime-series of order CI (,). This definiion can be augmened o he cases wih more han wo ime-series. Engel-Granger and Augmened Engel-Granger ess are performed as follows: firs, we esimae he regression using OLS mehod, hen we examine he reliabiliy of he residual expressions using DF or ADF mehods. if he residual expressions were reliable, i is concluded ha he variables are coinegraed. For he wo variables Y and X, he es is done in he following manner: Sep One: finding convergence of he wo variables using uni roo. If he order of convergence of he wo variables is equal, coinegraion is possible and we go o sep wo. 2. If he order of convergence of he wo variables is no equal, he variables may no be coinegraed. 3. If wo variables are saic, he es process sops, because he sandard regression echnique could be used for saic variables. Sep Two: If wo converged variables are of he same order, for example I(), he esimaion by OLS indicaes he long-erm equilibrium equaion. (Equaion 4) Y 0 X (Equaion 5) Sep Three: he equilibrium error for he wo coinegraed variables should be saic. Thus, ADF reliabiliy es should be done. This es is performed based on he following equaion. e e q ie i i However, he able of criical values is differen from he ables used for uni roo es of a single series, because if he variables are no co-inegraed, hen he esimaor OLS show a reliable picure of he residuals as much as possible. If he same criical ables of DF and ADF ess for a single series are used, he null hypohesis on he lack of coinegraion is wrongly rejeced in mos cases. In order o correc his bias, Engle and Granger (987) and McKinnon (990) calculaed criical values for he uni roo ess on he residuals by Mone Carlo mehods and hen presened hese values in ables. Therefore, he above ess are known as Engel-Granger and Augmened Engel-Granger ess. 5
Singaporean Journal of BuSineSS economics, and managemen SudieS Engel-Granger co-inegraion es mehod become famous for wo reasons. Firs, i is relaively simple ask o esimae he long-erm model by OLS and hen perform he uni roo es on he regression error erms. Second, esimaion of he long-erm model coefficiens is he firs sep o se and esimae a shor-erm error correcion model (ECM) ha will be explained below. ADF es on residuals is given in he Cobb-Douglas funcion in able (2). As can be seen, he es saisic value is -4.250 which is considerably smaller han he criical value wih a probabiliy of 5%, i.e. 3.6736. This shows he reliabiliy of residuals and hus, he coinegraion of he variables. Table (2). ADF es resuls on residuals in he Cobb-Douglas funcion ADF Tes Saisic - 4 2 50 98 % Criical Value * - 4. 5325 5% Criical Value - 3. 6736 0% Criical Value - 3. 2773 * MacKinnon criical values for rejecion of hypohesis of a uni roo. Augmened Dickey-Fuller Tes Equaion Dependen Variable: D (U) Mehod: Leas Squares Dae: 0/22/3 Time: 23:58 Sample (adjused): 370 388 Included observaions: 9 afer adjusing endpoins Variable Coefficien Sd. Error -Saisic Prob. U (-) -0.446782 0.20209-2.20798.040 D (U (-)) 0.8760 0.234498 0.7750.4489 R-squared 0.223857 Mean dependen var 0.05637 Adjused R-squared 0.7820 SD dependen var 0.863697 SE of regression 0.782969 Akaike info crierion 2.447852 Sum squared resid 0.4268 Schwarz crierion 2.547267 Log likelihood -2.25460 F-saisic 4.9037 Durbin-Wason sa.875280 Prob (F-saisic) 0.040760 (Source: Eviews Sofware Oupu) Wald es: his es applies cerain resricions on he coefficiens of esimaed funcion. One of is imporan applicaions is o es reurn o scale raio. For his es, we need o review he esimaed funcion once again: (Equaion 6) LQ 0/82LK 0/434LL 0/589LE In he Cobb-Douglas producion funcion, reurn o scale is calculaed by he sum of elasiciies. 0/82 0/434 0/589 /205 The degree of reurn o scale Reurns o scale in Aghajari Oil and Gas Producion Company is.205. since his value is larger han, here is an increasing reurn o scale (IRS). I means ha one percen increase in all producion inpus simulaneously will increase he produc by 20.5%. To accep or rejec his claim, he Wald es is used. The assumpions of his es include: (Producion consan reurns o scale) H 0 (Producion consan reurns o scale) H 6
Singaporean Journal of BuSineSS economics, and managemen SudieS In his es, we decide on acceping or rejecing he null hypohesis based on he resuls of F and chi square ess. If he probabiliy values of hese saisics are less han 0.05, we rejec H0 a 95% confidence level. The resuls of he Wald es are presened in Table (3). Table (3). The Wald es resuls Wald Tes: Equaion: COBBDOUGLAS Null Hypohesis:. 205 C (2) + C (3) + C (4) = F-saisic 7 0.60779 Probabiliy 0.00 557 Chi-square 6. 5474 9 Probabiliy 0.00 4247 (Source: Eviews Sofware Oupu) According o he above able and he values of F and Chi square ess equal o 7/6777 and 6/5474, and heir probabiliy coefficiens equal o 0/00557 and 0/004247, i can be concluded ha H0 is srongly rejeced, and his resul is compleely consisen wih he model esimaion resuls, which is he increasing reurn (and no consan reurn) o scale. Shor-erm model esimaion The firs sep o se and esimae a shor-erm model is deermining Error Correcion Mode (ECM) ha shows he shorerm dynamics and he speed of long-erm adjusmen. Therefore, he ECM model esimaion is necessary o obain he shor-erm model. The co-inegraion beween a se of economic variables provides he saisical basis for using Error Correcion Models (ECM). These paerns go growing repuaion in experimenal works. The major repuaion of error correcion models is linking he shor-erm flucuaions of variables o heir long-erm equilibrium values. When wo variables y and x are coinegraed, here is a long-erm equilibrium relaion beween hem. However, here migh be some imbalances in shor-erm. In his case, he error erm of he following equaion can be considered as he equilibrium error. (Equaion 7) Y X (Equaion 8) U Now, his error can be used o link he shor-erm behavior Y wih is long-run equilibrium value. For his purpose, he following model can be se. (Equaion 9) U Y X Y X 0 2U Where U is he residual of esimaed regression wih a ime lag. This model is known as error correcion model (ECM) where he changes in Y been linked o he equilibrium error in previous period. When Y and X ha boh a degree of convergence I (), are co-inegraed, hen he residuals U of equaion (4-2) zero order of convergence I(0) and hey are reliable. As a resul, i is possible o esimae his model wihou fear of spurious regression using OLS esimaes and he saisics and F. In shor, his esimaion is based on a wo-sage modeling sraegy as follows: 7
Singaporean Journal of BuSineSS economics, and managemen SudieS Firs sep: he parameers relaed o long-erm model are esimaed using he daa of variable level, hen he null hypohesis on he lack of co-inegraion beween variables are esed. Therefore, a se of co-inegraed variables will be found and a long-erm equilibrium relaionship is provided. Second sep: The Error Correcion Term (ECT) is he error erm of he saic long-erm regression model which is used as an explanaory variable in he ECM model. Then, we deermine he shor-erm dynamics hrough necessary ess. ECT coefficien shows he speed of adjusmen o he equilibrium and is expeced o be negaive. Firs, his mehod was inroduced by Sargan (984) and hen rose o fame well-known by Engel and Granger (987). In spie of being simple and low cos, his approach also some drawbacks. Alhough OLS esimaors of he above coinegraion regression are consisen, hese disribuions are no normal and srongly depend on oher model parameers. In addiion, he bias of esimaors in small samples can be subsanial. Therefore, he saisical inferences migh be misleading and wrong decision are made abou he variables o be insered in he model and he bounds o be applied. In he second sage, he bias of esimaors is ransferred o he error correcion erm and may also affec shor-erm model parameers. Now, in order o se he error correcion model of he esimaed funcion (Cobb-Douglas model), we pu he error erms of he co-inegraed regression in Table (4) wih a ime inerval as an explanaory variable along wih he firs difference of he oher model variables. Then, we esimae he model coefficiens using he mehod OLS. The resuls are shown in Table (4). Table (4). The resuls of ECM model esimaion Dependen Variable: D (LQ) Mehod: Leas Squares Dae: 0/22/3 Time: 20:27 90 Sample (adjused): 369 3 Included observaions: 22 afer adjusing endpoins Variable Coefficien Sd. Error -Saisic Prob. D (LK) 0.60052 0.2669.05566 0.0034 D (LL) 0.398278 0.246680.092963 0.0087 D (LE) 0.525447 0.253540.07659.003 ECM (-) -0.524560 0.72650 -.994223.0043 R-squared 0.99685 Dependen Mean var 0.63956 Adjused R-squared 0.990593 Dependen SD var.735652 SE of regression 0.4745 Akaike info crierion -0.790087 Squared Sum resid 0.56725 Schwarz crierion -0.589234 Log likelihood 9.90087 F-saisic 00.0678 Durbin-Wason sa.785626 Prob (F-saisic) 0.000462 (Source: Eviews Sofware Oupu) As i is obvious, all model coefficiens are absoluely significan. The coefficien of deerminaion is 0.99 ha shows he high explanaory power of he model. The coefficien of error correcion erm (ECT) is equal o -0.52, which means ha 52% of he imbalance in each period is adjused. The deviaion o equilibrium occurs fas. Comparing he coefficiens of producion facors in shor-erm and long-erm funcions indicaes ha here is lile difference beween hese coefficiens. The signal of all coefficiens are consisen wih heoreical expecaions. The coefficien of capial elasiciy in shor-erm is 0.6 which a sligh difference wih he long-erm elasiciy of capial (0.82). Labor elasiciy coefficien is equal o 0.398 which is equal o he same facor in he long-erm model (0.434). Energy elasiciy coefficien is equal o 0.525 which is slighly differen wih he same facor in he longerm model (0.589). The esimaion of labor produciviy rae U 8
Singaporean Journal of BuSineSS economics, and managemen SudieS Consider ha producion growh is coninuous. According o he definiion of growh rae, if Y is a funcion of ime as Y = f () is, hen we : (Equaion 0) y y r In fac, y is he change rae of Y and above equaion is a differenial equaion, hen we : y y is he change rae of a uni of Y, i.e. he growh rae is r. Bu he (Equaion ) dy d dy r r. d Y Y This is a separae differenial equaion: (Equaion 2) ln y r ln c (Equaion 3) ln Y c If we presume ha y 0 = y a = 0, hen we : (Equaion 4) r y y. e r. y r ce Considering he oil price ha was 9.9$ in 999 and 50$ in 2009, we : 9, y y y y 88, 0 78 (Equaion 5) We conver he values o he fixed price of he year WF using he consumer price index (CPI). Thus, we will : y 999=3889 and y 2009=88365. So we : (Equaion 6) 9
Singaporean Journal of BuSineSS economics, and managemen SudieS ln y ln y 0 r lne If we ake an ani-log from he above equaion and hen muliply he decimal par by 00, he average rae of labor produciviy growh is calculaed (r=.078). Then, he average produciviy growh in Aghajari Oil and Gas Producion Company is 7.8%. Conclusion The main objecive of his sudy was o esimae he producion funcion and he labor produciviy rae in Aghajari Oil and Gas Producion Company. The firs sep was o analyze he daa and deermine he saus of he daa in erms of heir saic and dynamic naure and degree of convergence. I was done by Augmened Dicky-Fuller es (ADF). The main idea of coinegraion analysis is ha alhough many of economic ime-series migh be unreliable, a linear combinaion of hese variables in he long-erm may be reliable. There are several ways for coinegraion es. In Engel-Granger coinegraion es, firs he regression equaion is esimaed by OLS and hen apply he uni roo es on he residuals. If he residuals are reliable, hen he coinegraion is acceped; oherwise, he regression equaion is unaccepable. The special limiaions of Engel-Granger mehod including he problem of variables wih convergence orders higher han I(), made he economiss o uilize Johansen-Juselius mehod. According o he resuls, he variables affecing producion in Aghajari Oil and Gas Producion Company, include capial, labor and energy. The elasiciy of hese variables in he long-erm is obained by OLS equal o 0.82, 0.398 and 0.589, respecively, which indicaes posiive producion elasiciy o he menioned inpus. In addiion, he resuls of Wald es showed ha reurn o scale in Aghajari Oil and Gas Producion Company is increasing and equal o.205. Regarding he increase in producion and produciviy in Aghajari Oil and Gas Producion Company, he following iems are suggesed: Esimaing he cos funcion for Aghajari Oil and Gas Producion Company and applying he drilling and exploraion coss on i, and finally esimaing he producion funcion. Esimaing he producion funcion and calculaing he labor produciviy rae in oher companies affiliaed o he Oil Minisry and comparing hem wih Aghajari Oil and Gas Producion Company. The resuls of he producion funcion esimaion wih increasing reurn o scale raio indicae ha he developmen of he company resuls in economies of scale. Therefore, according o he increasing demand of he marke, Aghajari Oil and Gas Producion Company can, in he firs insance, increase human resource inpus and secondly, increase is capial in order o expand is business and hus produce more energy for producion. The reason for relaively large energy coefficien in Cobb-Douglas Producion Funcion is ha he producion values in gas and liquid-gas unis as well as increasing he gas pressure heavily depend on elecriciy and he producion values been calculaed in B.T.U. As i was observed, he conversion coefficien of gas and liquidgas is high. Therefore, i is recommended o evaluae and implemen energy reducion soluions hrough a commiee under he supervision of he Managing Direcor. Regarding he increase in labor produciviy in organizaions, he following cases are proposed: Inroducing managersmanagers wih efficien mehods of operaion, healhy equipmen and ools, a balanced work environmen, an appropriae organizaional srucure and, mos imporanly, providing suiable plaforms for he opimal use of qualified and deserved human resources o increase produciviy in organizaions. Increasing consisency beween jobs and workforce skills. In his case, i seems ha raining human resources wih irrelevan skills or replacing expers wih irrelevan workforce can increase he produciviy of he labor force. 20
Singaporean Journal of BuSineSS economics, and managemen SudieS I is possible for all employees a all levels and organizaional posiions o coninue higher educaion wihou any discriminaion and hus a special quoa in universiies and higher educaion insiuions should be designaed for his purpose. Also, he permission for days off and educaion missions and he uiion fees of hose employees who acceped should be provided. Considering he ineres and desire of employees for early reiremen and preparing he ground for early reiremen of some of inefficien and non-specialis forces (5 o 0 years of leniency), and employing young specialiss people wih higher educaion for increasing he produciviy. Increasing he moivaion for doing useful works hrough esablishmen of a relaionship beween he level of wage and salary wih produciviy level. Improving he qualiy of educaion offered o he workforce, expanding in-service raining. Paving he ground o expand he use of ICT in he organizaion. References Taheri, Sh. 2009. Produciviy and is analysis in organizaions. Hasan publishing, prining XVI. Emami Meibodi, A., Izadi, Z. 2008. Measuring he Technical efficiency and produciviy of oil refineries in Iran, Energy Sudies, Issue 7, pages 56-3. Abahi, H.; Kazemi, b. 2006. Produciviy. Firs Ediion. Tehran, Publisher: Insiue for Sudies and Research on Trade. Khaki, Gh. 2007. Produciviy Managemen. Kouhsar Publicaion, Fifh Ediion. Mahmoodzadeh, M., Asadi, F. 2007. Impacs of ICT on he growh of labor produciviy in Iranian economy, Quarerly Journal of Commerce, Issue 43, pp. 84-53. Varzeshi, 2008. Measuremen and Analysis of TFP in large indusrial workshops. Maser s Thesis in Economics, Universiy of Ahvaz Research and Sciences. Hadi Zonooz, B., Bakhiari, H., 200. Facors affecing he measuremen of TFP: A Case Sudy of Carbon Company of Iran, Issue 2, Pages 266-24. Ghalambaz, F. 2009. Esimaion of producion funcion and he labor produciviy rae in Karoon Oil and Gas Producion Company. Maser s Thesis in Economics, Universiy of Ahvaz Research and Sciences. Emami Meibodi, A., Izadi, Z. 2008. Measuremen of echnical efficiency and produciviy in oil refineries in Iran, Energy Sudies, Issue 7, pages 56-3. Mackinnon JG990. Values for co-inegraion ess Criical.in Rfengle and Cwjgranger (eds) Long- run Economic Relaionships, Oxford Universiy Press, Pp.267-276. Morikawa M.200. Unions and produciviy Labor: an empirical analysis using japanese Firm- daa level. Journal Labor Economics. Mikea A, Mulder P.2003. Energy- produciviy convergence across developmen and developing counries in 0 manufacuring secors. Phillips PCB, Perron P.988. For a uni roo in imes series regression Tesing. Biomerica 75,335-346. P Harley 7-, Sickles R. 2004. Opimal dynamic policy producion: he case of a large oil field in saudi arabia. Hoson, Texas. 2