Human Capital and Economic Growth in Iran

Nazar Dahmardeh (Ph.D) Mosayeb Pahlavani(Ph.D)

ABSTRACT

One of the most important ideas in the United Nations Development Program is the role of human capital in the process of economic growth. Since the 1990s human capital indices have changed significantly as a result of scientific and political improvement. The quality of an effective labour force, which is known as human capital, is very important in the development process. Human capital creates suitable conditions for development and this leads to the optimal use of physical capital, which results in more productivity and further growth. This research uses the Romer endogenous growth model to examine the role of human capital in Iran’s economic growth. More specifically, the positive relationship between human and physical capital, and manufactured exports and their effects on GDP growth are examined and analyzed. The empirical results show that the positive and significant relationship between human capital and economic growth appears as soon as the structure of the economy has enough capacity to absorb the skilled labour force in different sectors of the economy. It should be noted that improving educational standards among the active population leads to a gap between the educated labour force and employment opportunities in the economy. This situation can lead to unemployment within the educated labour force.

Keywords: Human Capital, Endogenous Growth Model, Education and Iranian Economy.