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The multiple objective of this paper was: 1) to identify the effective determinants of labor factor productivity and 2) to measure the extent
of the effect of labor productivity on production costs and export of manufacturing products in Iran. For this purpose, based on (ISIC-2
:;:,.f digit) time-series manufacturing data for (1994-99) period, a system of
simultaneous equations system was utilized, using an 12SLS
. r.e,gressjon teFhnique.,
':J 'The results indicated the education and dexterity level of industrial c:' dabor force in Iran has had an :appreciable and meaningful effect on
_daborproductivity during the study period; Moreover, increased. labor productivity that was. experienced by the industry, b.as.resulted in a ,reduction in the unit labor cost, which in turn, has led to reduction in
average cost of production, making Iranian manufacturing exports
, . '
more competitive. The results do not show any significant and
meaningful effect of manufacturing exports on industrial labor productivity, and thus, gives no support to the "learning-by-exporting"
hypothesis.

The paper calls for an effective government policy to strengthen the integration and consistency of the industry's labor force education and specialization requirements with the educational programs within the higher education system in order to enhance the international competitiveness of the manufacturing sector in Iran.