Estimation of production function and labor productivity rate in Aghajari Oil and Gas Production Company

Abstract

Considering the importance of oil in national income and gross national product, the estimation of oil production function is of particular importance. In this regard, Karoon Oil and Gas Production Company as the largest oil and gas production company in Iran was selected as the research subject and its production function has been estimated during the period 1989-2011. For this purpose, the reliability of the study variables was examined by Dickey - Fuller Augmented test. Then, the error correction model was estimated using Engel-Granger cointegration. The results showed that the function is in the form of Cobb Douglas during the study period. The elasticity of labor force, capital and energy are 0.398, 0.182 and 0.589, respectively. The Wald test result indicates that there is increasing return to scale.