Analysis of the Relationship between Research and Development, Human Capital and Total Factor Productivity in the Industry Sector of Iran

Today, increasing in productivity in industry sector is not only influenced by investment in research and development, but also is encouraged by human capital. Accordingly, the present study shows that total factor productivity in the manufacturing sector depends on domestic expenditure in research and development, investment in research and development partners, human capital and openness of economics. For this purpose, using ARDL methodology, regression models and the time series between years 1980 to 2010, total factor productivity equation was estimated. The results indicate that the cost of investing in domestic industry research is weaker than accumulation of research partners in this sector. Also, the human capital variables and the openness of economics have positive effects on the productivity of the industry. The results of the study suggest that at least a significant share of national production should be allocated for research and development and training of human resources. In addition, since the spillover of research and development in developed countries is higher than developing countries, selecting business partners in future industry should be done with care