Mofid University The Journal of Economic Studies and Policies 2423-4648 0 22 2012 12 21 An Introduction to Institutional Explanation of Low Productivity in Iranian Economy An Introduction to Institutional Explanation of Low Productivity in Iranian Economy 53 78 26162 10.22096/esp.2013.26162 FA Mahmoud Motavaseli Professor, Faculty of Economics, University of Tehran Farshad Farshadmomeni Assistant Professor, Faculty of Economics, Allameh Tabatabai University 0000-0002-9772-3971 Jamal Fathollahi Mofid University PhD student in economics Journal Article 2010 10 27 Evidences of internal and external statistics and researches show that total factor productivity (TFP) in Iran economy is low. This paper seeks to extract a framework for explaining the reasons for low productivity performance in Iranian economy. <br />Research method of this paper is descriptive-analytic.  Analyzing and using of information, literature, history, and empirical evidences are based on theoretical framework of institutional school especially the North’s theories. <br />In North's view, to improve productivity, two sets of institutional reforms should be implemented: <br />a) The supply side changes: improve productivity by lowering either transaction or transformation costs. <br />b) Demand side institutional changes: supply induced changes in organization and technology alter the perceived costs and benefits to individuals and groups throughout history and engender responses through group action or the political process which in turn alter the productivity of the economy. <br />Achieving high performance in productivity requires viable governance that creates economic institutions and provides effective enforcement. Institutional sets of each country should be designed based on local knowledge. Participatory political system is the most effective mechanism for collecting local knowledge to design such institutions. Evidences of internal and external statistics and researches show that total factor productivity (TFP) in Iran economy is low. This paper seeks to extract a framework for explaining the reasons for low productivity performance in Iranian economy. <br />Research method of this paper is descriptive-analytic.  Analyzing and using of information, literature, history, and empirical evidences are based on theoretical framework of institutional school especially the North’s theories. <br />In North's view, to improve productivity, two sets of institutional reforms should be implemented: <br />a) The supply side changes: improve productivity by lowering either transaction or transformation costs. <br />b) Demand side institutional changes: supply induced changes in organization and technology alter the perceived costs and benefits to individuals and groups throughout history and engender responses through group action or the political process which in turn alter the productivity of the economy. <br />Achieving high performance in productivity requires viable governance that creates economic institutions and provides effective enforcement. Institutional sets of each country should be designed based on local knowledge. Participatory political system is the most effective mechanism for collecting local knowledge to design such institutions. https://economic.mofidu.ac.ir/article_26162_788d86caae986ef0263c78f1a7fee0b9.pdf